Your clients have worked a lifetime to create financial security for themselves and their family. They are comfortable and have assets that they may not need to fund their retirement. How can we best prepare them now to pass their wealth on to their loved ones? One of our non-conventional strategies that will help your clients succeed in their financial accomplishments is insured family legacy planning.
Life Insurance is a powerful tool you may utilize when planning a legacy for multiple generations. Your clients may already be familiar with its primary use – providing money to your family or other beneficiaries after death. But the value of life insurance exceeds just that. Permanent life insurance provides both death benefits and possibilities through cash value accumulation. If properly structured, it can positively meet the planning goals of multiple generations.
Our Insured Family Legacy Plan allows grandparents (Generation 1) to purchase cash value life insurance where the insured is their children (Generation 2). The reason buying life insurance on their children is attractive is:
1. Grandparents (Generation 1) likely have health issues that make underwriting (qualifying) difficult.
2. The policy will accumulate cash values much more rapidly on the younger person (Generation 2)
3. They are able to create a much higher death benefit because the insured is younger (Generation 2)
4. The ownership of the policy is important because Generation 1 own the policy and control the cash values
Parents/grandparents who want to provide a legacy for their children/grandchildren.
Generation 1 purchases a Life Insurance Policy on the life of Generation 2.
Upon the death of Generation 1, the policy is now owned by the insured
Upon the death of Gen2, the policy proceeds can provide a legacy for Gen3.
Life insurance serves as one of the most, if not the most, tax-effective way to transfer money. Depending on the policy type, it can provide guarantees no other product or tool can. With life insurance, grandparents have the ability to put some money aside on a tax-advantaged basis that will eventually go to their grandchildren. It allows them to start “giving” away their money while still retaining control over it. If they should ever need this money for their retirement income, they can access it for their own income.
Oftentimes we see that the older generation feels like they have had it better financially or had better opportunities in their lives compared to their parents and done better. However, they also feel like their children may only do about as well as they did. With the political environment, taxes, debt, stock market and other important factors, grandparents are extremely concerned that their grandchildren will not be able to have it as good as their children or certainly not as well as they did. The Insured Family Legacy Plan is critical because it helps to ensure their grandchildren are financially secure.