Six Surprising Uses for Life Insurance
 


Help cover expenses during your lifetime. With permanent life insurance, such as whole life or universal life, your policy generally accumulates a cash value that you can draw on fro any reason. If you need cash for, say college tuition or to supplement your retirement income, you can generally withdraw or borrow from your policy’s cash value, It is important to remember, though that interest is charged on loans, and withdrawals and unpaid loans reduce the policy’s cash value and death benefits.

Save as a business-succession tool. Life insurance is frequently used by owners of small business to fund buy-sell agreements. When an owner dies, the life insurance policy provides the cash necessary for the business or the surviving owners to purchase the deceased owner’s interest in the company from his or her estate or heirs.

Protect your company from the loss of a key employee. The death of an executive who plays a crucial role in your company can have serious financial consequences for your business, such as lost sales, lost clients, and the cost to recruit and train a replacement. A type of life insurance policy known as key person insurance can help your company weather the loss. Key person insurance is simply a life insurance policy that a company purchases on the life of a key executive. The company pays the premiums and is the policy’s beneficiary. If the key executive dies, the life insurance proceeds are paid to the company so that the company has the cash to help cover the financial losses it may suffer as a result of losing the employee.

Equalize inheritances. If you plan to leave a sizeable asset, such as a business or a house, to a just one of your heirs, the proceeds from a life insurance policy can provide a comparable cash inheritance to your other heirs.

Replace wealth donated to charity. The proceeds from a life insurance policy can help replace for your heirs the value of assets that you donate to charity. For example, let’s say you want to make an immediate gift to charitable remainder trust in order to improve your income from a highly appreciated asset (stock, land, or their property) that is currently generating little or no income. While you stand to benefit financially from your gift during your lifetime, the assets remaining in the trust when you die will pass to your chosen charity, not your heirs. For this reason, a charitable remainder trust is sometimes paired with a life insurance policy whose proceeds can provide an inheritance for the heirs.

Pay estate taxes. If your estate will be subject to estate taxes (most will not be) the proceeds from a life insurance policy can help provide the cash needed to pay those taxes so that family, businesses, farms and other assets do not have to be sold simply to pay the taxes.

Talk to your financial advisor about whether life insurance should be a part of your wealth management strategy. If so, your advisor can help you pinpoint the type and amount of life insurance appropriate for your financial objectives.

As always, we are available for any questions or concerns you may have. So feel free to call or email us at 925-757-6018 or send me an email at jblanco@smeefinancial.com

 

Juan Pablo Blanco, Grady Elliott and the Rest of the Smeed Financial Team
201 Sand Creek Rd. Ste. E
Brentwood, CA 94513
925-757-6018
Jblanco@Smeedfinancial.com

 

 

 

SMEED CPA, Inc | 201 Sand Creek Road, Suite F | Brentwood, CA 94513
The Next Frontier CPA Firm | www.SmeedCPA.com | info@smeedcpa.com
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