The economic leverage of life insurance and, in most cases, its tax-free transfer aspect, delivers a financial to beneficiaries like no other product line or planning strategy. Whether indemnifying a single life or two lives, life insurance can pay estate-transfer taxes and costs as well as create an estate with pennies on the dollar. Life insurance is the law of large numbers working for you.
Passing an inheritance to family, friends or a beloved charity can financially position them to accomplish goals even when you’re gone. Protecting partners in a business arrangement can add significant solace to the company and fund succession plans in case of the demise of a partner.
For domestic planning survivorship, life insurance is ideal, especially if both policy insureds are healthy, but even when they’re not, the leverage or bang for the buck generally remains the economic way to go. The transfer of family assets may incur taxes at the state and federal levels as well as transition costs. With new and improved mortality, survivorship life insurance can also create legacies not just for the succeeding generation, but also for two additional generations. This new trend is already emerging in estate planning where children, grandchildren and great-grandchildren represent multi-generational recipients. It’s creating a family legacy that extends beyond 100 years, in some cases funding two centuries of progeny.
It doesn’t stop there. Charitable giving at death is no longer for the rich patron or wealthy philanthropists. Benevolent givers who have big hearts, but small wallets, can fund their favorite charities and non-profits for pennies on the dollar.
When you consider you can protect your business by protecting your partners, succession plans can go forward even if you’re not there and your family will receive the buyout proceeds without a hitch. Of course, plan documents need to be drawn up and executed in tandem with the appropriate life insurance policies to fund a buy/sell, cross purchase, stock redemption or a wait-and-see trust. Using life insurance for inheritance and business succession planning is one of the optimal ways to fund family legacies, business succession and charities of choice.