Life Insurance Review & Analysis
Say the words "life insurance" to some people, and you're likely to get a less than enthusiastic response. But, more and more frequently, people are discovering that life insurance can be a helpful financial tool. Life insurance offers a way for you to help provide for your family, protect your business, and make charitable gifts without reducing your estate.
Life Insurance Can Help with Estate Planning
A life insurance policy on your life can help provide your future heirs with funds to pay the expenses of settling your estate without dipping into its assets. It also can help replace the income that your family may lose as a result of your death. A life insurance policy is one way to ensure that money will be available to your future heirs for their immediate or long-term financial needs.
If you're the owner of a small business, life insurance proceeds can help supply the funds to pay estate taxes and administration expenses, eliminating the possibility that the business will have to be sold to meet these needs. You also can use life insurance to fund a buy-sell agreement for the purchase of your business interests by other stockholders, partners, or your corporation.
You can exclude insurance proceeds from your estate by having a trust or the individuals who will benefit from the proceeds purchase and own the policy. A trust may offer several advantages, so you'll want to consider all your options.
Life Insurance Can Fund Charitable Giving
If charitable giving is among your priorities, a life insurance policy can be designed to benefit your favorite charity while allowing you to take advantage of a tax deduction for your contribution. There are several ways to do this. You could purchase a policy on your life and contribute it to the charity. In most cases, you can claim a charitable deduction on your federal income-tax return for your donation and any subsequent premium payments you make. (Check the laws in your state, however, as some states restrict such gifts.)
You also might consider funding a charitable trust that will pay you an income during your lifetime and provide a donation to charity at your death. This arrangement won't reduce the assets your future heirs will inherit if you purchase life insurance to replace the amount passing to charity.