WHAT IS WEALTH TRANSFER?
Wealth Transfer is the transfer of wealth or assets to beneficiaries upon the death of the owner in a tax-efficient manner through the use of financial planning strategies that often include wills, estate planning, life insurance, and in some cases, trusts.
When considering wealth transfer, most retirees want to be assured that, no matter the size of their estate, their assets will move to the people they choose at the lowest possible rate of taxation and at the highest rate of interest earned throughout the life span of the financial products they have acquired. Consumers should also consider that a Single Premium Life Insurance product could be one of the most efficient wealth transfer instruments available.
Watch our video to LEARN How to Shield YOUR HEIRS FROM THE "TAX TIME-BOMB"
Why you should consider SINGLE PREMIUM LIFE
Today there are many types of life insurance products from which to choose: Universal Life, Indexed Life or Whole Life policies. Since many heirs of these policies fall within the "middle class" category, they do not require ultra-sophisticated estate planning strategies. However, whether or not estate taxes will be a factor in your personal wealth transfer planning, income taxes can absolutely become a huge issue.
Single Premium Life products take advantage of current tax laws. They provide you (the insured) with an immediate sum of funds to increase the size of your estate. When later those same funds are passed on to your heirs, the proceeds will be received federal income tax-free and will bypass probate!
IS SINGLE PREMIUM LIFE RIGHT FOR YOU?
If you are between the ages of 55 and 85 with money set aside and earmarked for future generations, you may be an ideal candidate for Single Premium Life. If you are somewhat conservative and prefer guarantees rather than assumptions, you are also an ideal candidate. Since Single Premium Life is life insurance, you will need to be enjoying fairly good health and be able to meet underwriting requirements; however, many of these products are available as “simplified issue” and do not require a medical exam.
When you are considering a Single Premium Life product, you should use funds you do not anticipate needing for future income purposes. Therefore, ask yourself one simple question: “What is the purpose of the money I have accumulated?” If you intend to pass on all or part of that specifically-designated money to your kids, grandchildren or church, then you are a very good candidate for Single Premium Life. If you have money in CDs, a passbook savings account or out-dated fixed annuities, you may also be a good candidate. If you have money you don’t use because you have other sources of income (such as CDs that you roll over year after year), again, you are definitely an excellent candidate for Single Premium Life.
Here is another important consideration: Interest on CDs and passbook savings accounts is taxable each year, and those taxes reduce your overall legacy to your heirs. Deferred annuities earmarked for your kid's inheritance also include a tax time-bomb that could really disrupt your heir's income tax situation. You see, annuities are specifically-designed to provide lifetime income for you - not to facilitate wealth transfer to your heirs. Therefore, the interest earned over the years in the annuities you leave to your beneficiaries is fully-taxable, meaning the longer the annuity accumulates monies, the more income taxes your heirs will pay!
Furthermore, since those income taxes are calculated based on your heir's tax bracket, which may be higher than yours, your heir's taxes could be significant. For those people who do not need to use all of their money for their own income (living expenses, etc.), Single Premium Life can absolutely help eliminate those taxes.
Single Premium Life was specifically designed as a wealth transfer product. In addition to the death benefit – which is several times higher than the initial single premium – most Single Premium Life product also provides accelerated death benefits for nursing home care (meaning you can actually withdraw part or all of the death benefit of the policy to pay for your nursing home care) as well as home health care services.
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Robert J. Knox and Joseph C. Zappia, III, CFEI
Venn Financial Solutions
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Altoona PA Financial Advisors - Robert J. Knox and Joseph C. Zappia, III, CFEI, of Venn Financial Solutions offer Investment Advisory Services through their registration with Venn Wealth & Benefit Services, LLC. A Pennsylvania Registered Investment Advisor.
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