Why Estate Liquidity Through Life Insurance Is Best- Part II
In Part I of this blog, we saw that life insurance provided, in my opinion, the most practical means for establishing estate liquidity. Now we will look a little more in-depth to the advantages that allow it to be such a great method for doing this. These will be the most important points of focus:
First, life insurance can help avoid the losses that can result from the forced sale of estate assets.
Second, it can enable the estate to meet its liabilities without borrowing extra money. Instead of placing the burden on the heirs to pay the interest on the shrinkage costs as well as the principal sum, the client pays the interest while he is alive, but the insurer pays the principal upon death.
Third, it will promote the effective transfer of the estate. With the estate free from encumbrances, you can more readily carry out the plans that the owner had expected.
Fourth, the life insurance plan makes it unnecessary to keep large amounts of cash or low-yield bonds. The plan needs a small amount of current income and at death, leaves the estate’s cash and securities unscathed.
Fifth, by the simplification of estate transfers, it will reduce administrative costs. This saving could substantially offset the cost of the life insurance.
Sixth, it can allow the payments of the estate obligation through an installment plan. In the same way that income and property taxes are paid in installments year-by-year, the life insurance plan makes it possible to make the estate transfer costs in the same fashion.
Seventh, one of the most important to understand, the life insurance plan can pay the cost ‘for’ the estate instead of ‘from’ the estate. Some current tax laws can allow the insured to remove life insurance proceeds from the taxable estate if certain conditions are met. For an estate owner with a potential estate tax problem, these provisions of the laws are very important. This leads to one of the strongest arguments for using life insurance for a source of estate liquidity because in this way, none of the proceeds go to the government.
Lastly, life insurance is the least expensive solution to the problem. Estate dollars can be purchased at a lower cost under this plan than any other. Isn’t it time you thought about life insurance in your estate portfolio?
About the author: Kyle McDonald holds FIC, FICF, FSCP® & CLTC designations. His viewpoint on life insurance is simple, “Anyone with a family must have life insurance. In the end, life insurance is for others you care about, not you.” He is ready to help you and your family get the best option available. Contact Kyle today at 1-800-651-1953 or KMcDonald@Pivot.com.