Is Your Life Insurance Policy Being Used to the Fullest?
Did you know life insurance has two main tax advantages, namely, that the internal cash buildup within a contract is tax-deferred, and that the death proceeds are generally* received income tax free.
No other financial product at this time, other than a tax-qualified retirement plan, allows the tax payer to postpone, sometimes forever, income tax on the return of an invested premium. There are some forms of investments, such as the income from tax-exempt mutual funds that are exempt from income tax, but they do not possess the ability to create a large liquid estate with little to no risk of the loss of investment in the fashion that life insurance does.
Currently, competing investments are at a greater disadvantage compared to life insurance products. For example, IRA’s are now subject to strict rules for tax payers covered by an employer’s tax-qualified retirement plan. Many of us who were once able to make the maximum annual deductible contribution to an IRA might now be limited in the amount of tax-deductible contributions that can be made, and many people are now ineligible for a traditional IRA deduction.
Tax-qualified employer-sponsored retirement plans are now subject to even more stringent rules, regulations, and limitations on benefits for highly paid employees. Tax-sheltered investments, the most typical form of which is the limited partnership, have also lost their major attraction to a lot of investors, namely, the ability to offset taxable income from other sources with paper losses.
As you can see, the advantages of life insurance can create a very competitive financial instrument that can be utilized to create an estate in ways that other investments may not. You may want to ask yourself - Is your life insurance policy being used to the fullest? Give me a call at 1-800-651-1953 so that I can help you understand your options.
*Modified Endowment Contracts (MEC’s) would be an exception to this.
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.