Broker Check

High Net Worth & Estate Planning

Life Insurance Can Create Efficiency for High-Net-Worth Families

When you’re a wealthy individual or family, it’s easy to think that you don’t really need a life insurance because you already have enough money, investments and real estate to provide for your heirs; however, this isn't always true.

Tax efficiency

The policy death benefit will generally be paid income tax free to your spouse or family. In addition, the policy ownership can be structured to keep it out of your estate for estate tax purposes.

Value not subject to market conditions

Unlike securities or real estate, the value of your policy death benefit and cash value will not vary based on changes in the financial markets.

Easily divided

The life insurance will be paid to your beneficiaries based on your wishes and may help you balance bequests to family members if you have a business or property that you want to leave to specific family members.

Not subject to probate

The death benefit paid directly to beneficiaries avoids the delays and expenses of probate and will not be part of any public record.

Create Liquidity

The estate of a HNW family can often be illiquid (business interest, real estate, etc.).  The life insurance death benefit provides cash to trustees and/or beneficiaries promptly, giving them the liquid assets needed to pay debts, facilitate a buyout of a family business or pay federal estate taxes without having to sell off other assets quickly to cover those expenses.  

Tax-Deferred Growth

Permanent life insurance builds up cash value over time as you pay premiums. In the case of whole life insurance, the cash value grows at a rate guaranteed by the carrier that isn’t affected by market conditions. 

The growth in cash value is on a tax-deferred basis, meaning this is money that grows without the IRS taking a bite. And it can become an important nest egg for your future.

Tax-Advantaged Distributions

You may use your policy as an additional source of tax-advantaged income during retirement through a combination of partial surrenders and policy loans.

For HNW individuals in the highest tax brackets, this can make a meaningful difference on the amount of net income they receive, per dollar withdrawn.  

Unlike traditional 401(k) plans and IRAs, there are no tax penalties for taking distributions from a life insurance policy prior to 59½. Distributions can be taken at any time and for any reason, provided sufficient policy cash value is available to do so.

Long Term Care Coverage

By including a rider on your permanent life insurance policy, you can gain valuable additional living benefits, allowing you to accelerate or use a portion of your policy death benefit during your lifetime to help pay for long term care. A