Strategies to Benefit Beneficiaries
Life insurance guarantees that your beneficiaries will get the money allotted to them tax-free. You can pay for a child’s future college education provide a retirement fund for your spouse or make sure your survivors have the money they need when you’re gone.
With life insurance you can transfer a policy’s death benefit income tax-free to beneficiaries no matter how big the death benefit is. Unlike an inheritance on other retirement plans or annuities where beneficiaries pay a hefty price to the IRS they won’t pay any income tax on the money they get from a life insurance policy.
Other Tax Benefits of Life Insurance
Have you maxed out your retirement contributions for the year? If so it’s important to know there are no restrictions on how much you can put into permanent life insurance. This plan should not be used as a substitute for an emergency fund though. If you take cash out of the permanent life insurance policy you will be subjected to paying taxes on that amount.
Staying Safe From Higher Taxes
If the thought of income and estate taxes rising has you worried permanent life insurance can help you transfer wealth into a shelter that protects your assets from higher taxation.
Using the Equity for Cash
After equity has built up in your policy it can be used as a loan to supplement your retirement income or used for other needs. You won’t be subjected to pay federal income tax if you borrow cash value from the policy through loans. As a general rule loans are treated as debts not taxable distributions. This can give you access to cash value on a tax-advantaged basis.
These are just a few strategies to consider among many many others. Each of our clients brings with them a unique situation. We enjoy getting to know each client and creating a plan that will benefit his or her individual needs and goals. To schedule a first consultation with the tax professionals at Lindemeyer CPA click here and fill out our short online form. Someone will be in contact with you soon!