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10
Uses Life Insurance
Life insurance is unique
property. It can create an estate with low premiums in comparison to the
total death benefit. It also enjoys many tax advantages. Uses
include:
1. Providing liquidity to pay
death taxes and estate costs, thus avoiding the necessity of liquidating valuable assets to pay these expenses.
Note that Federal Estate Taxes are due only 9 months after death.
2.
Providing funds to pay off
a mortgage at death.
3. Providing spouse
insurance. In making an insurance needs analysis, we often forget or
underestimate the dollar value of work done in the home by both husband and
wife.
4. Providing funds for
college education. Either at death or during life, policy cash values can
help pay college costs. Loans or withdrawals will reduce future death
benefits.
5. Guaranteeing funds to
repay loans or other debts owed by the decent. Life insurance proceeds
provide cash to pay estate obligations and help provide the survivors with a
debt free start.
6. Supplementing retirement
income needs. The policy cash values can be used to supplement
pensions, Social Security and other retirement income.
7. Providing funds for an
orderly transfer of a business interest at death. Business owners may
have an agreement to buy the interest owned by a decedent, but lack the cash
to pay for the decedent's share of the business.
8. Providing funds for a
business at the death of a key employee. Insurance proceeds can be
used to recruit, hire and train a replacement. The proceeds can also
provide working capital to help offset financial losses due to the loss of
the key person's services.
9. Providing funds for
Charitable Giving. Life insurance death benefits payable to an
organized charity can help provide funds for the charity's work, and may
provide tax benefits as well.
10. Helping equalize
inheritances. For example, a decedent could leave a business interest to the
children who are active in the business, and provide benefits of equal value
to other children through insurance proceeds.
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