Insurance: A multi-purpose estate tool
Insurance can be a very helpful tool in estate planning and
can be used in several ways:
Life insurance to protect your estate
You can use life insurance to pay projected estate taxes
and protect your estate. Here’s how this strategy works.
Let’s say you have assets today that are valued at
$200,000. And let’s assume that in 20 years those assets
will be worth $500,000. That’s a capital gain of $300,000,
half of which - $150,000 – would be subject to capital
gains tax.
If the rate of taxation were 30%, that means the estate would
have to pay a tax of 30% on $150,000 or $45,000. This could
be a difficult burden and might require a loan or selling
off of some of the assets.
A better solution would be to take out an insurance policy
with a benefit payable of $45,000 – the expected tax
burden. The total cost in premiums of such a policy would
be relatively small, for argument sake, let’s say around
$5,000.
When you die, the $45,000 benefit would be paid to your heirs
tax-free. They would then use it to pay the $45,000 taxes
on the estate.
This is a very simplified example but it shows how this strategy
works. In this case, you spend $5,000 to save $45,000 in taxes
for a net saving to the estate of $40,000.
Three types of insurance to protect your financial health
 Critical
Illness, Disability and Long-term Care insurance are three
kinds of insurance that are quickly gaining popularity among
our aging population.
The first two – critical illness and disability insurance
– are designed to protect your finances if you should
become critically ill or disabled.
Thanks to modern medicine, chances of surviving such adversities
are getting better and better. But recovery is often lengthy
and expensive, involving losses to income and extensive costs
for care and treatment. Simply put, you may survive but your
finances may not.
If you’re like most, you probably believe that insurance
for your car, your home, your life and your health is all
you need. But without critical illness and disability insurance,
you’re leaving a gap in your financial security.
Long-term Care Insurance is becoming more popular because
more of us are living longer – statistics say we’ll
probably get to 80 or better. That’s the good news.
The bad news is that about half of us will need some form
of long term care.
Long Term Care Insurance provides a daily benefit or care
if you require the services of a long term care facility or
professional assistance at home.
It helps you maintain your independence and financial security
by giving you the resources you need, even in the face of
a serious health setback. At the same time, it gives your
children an alternative to them providing you with the care
and protects your estate for your beneficiaries.
Important information about our financial planning services can be found at the bottom of our
homepage.
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