Key Point – Tax avoidance does not equate to a reduced need for legacy planning to transfer wealth for non-taxable reasons.

You still need to be educated on issues that could distress the financial security provided by the proceeds of your life insurance policy. Beyond estate taxes, there is the potential for probate, gift taxes, financial mismanagement, and misuse.  Proper legacy planning is necessary to help avoid these threats.

Why and How much life insurance should you own?

If you have any concern that your entire estate will eventually exceed the current exemption limits, either single or married, than you should speak with a Tax Free Retirement Specialist to help with legacy planning to determine how much life insurance you should have.  Your beneficiaries can then pay the federal estate tax from the life insurance benefits without having to sell any of the estate assets.  Without the life insurance proceeds, they might have to sell estate assets most likely triggering capital gains tax on top of the estate tax.  You see, when you pass away, the Federal government is going to try and get as much money as they can.  It’s your responsibility with legacy planning to use the appropriate tax advantaged tools to protect as much of your wealth and pass it along to the next generation or a charity of your choice.

What type of life insurance?

Indexed universal life insurance will appeal to most people because of the ability to provide higher interest crediting strategies in the current low interest rate environment.  The internal rate of return of life insurance at life expectancy is now superior to returns offered by alternative fixed income vehicles – a result of life insurance’s tax advantaged status.  Because of low interest rates and the almost guaranteed fact that taxes will eventually rise, insurance products that offer tax-deferral are more beneficial to consumers today.

Who should own the life insurance policy?

If you don’t own it yourself, there are three practical options for the ownership of your life insurance.  We discuss the owner as being the beneficiary to prevent a taxable event.  Because if the owner, the beneficiary, and insured are all different people it becomes taxable.

• Your spouse as owner and beneficiary:

The concern here is not that they receives the life insurance proceeds, but what happens when they eventually passes away.  The original proceeds of your life insurance policy may be subject to estate taxes and perhaps probate administration when they eventually die. In addition they will be responsible for investing the proceeds of your policy. This can be quite an emotional burden on a spouse not prepared or equipped to handle financial decisions making.

• Your child as owner and beneficiary:

If the child is the owner, then the child is responsible for paying the premiums (unless the policy is a single premium policy).  Make sure they are capable of this responsibility because you do not want the policy to lapse because of an error. Your child also will be the legal owner of the policy proceeds.  Make sure the life insurance policy has enough proceeds to allow them to pay the estate to settle taxes, fees, and other expenses.

• An irrevocable life insurance trust (ILIT):

This may be the better choice for ownership as long as the Trust is not the beneficiary of the life insurance policy.   If the ILIT is the beneficiary of your life insurance, the proceeds may be included in your estate and become taxable.  The ILIT should only be the owner with the beneficiary usually being your children, grandchildren, or a charity.  This way the proceeds of your life insurance pass outside of your estate and are not taxable in most cases.  An ILIT can help avoid threats to your policy’s proceeds.  Because the designated trustee must manage the ILIT for your benefit, it helps ensure the availability of liquid funds when they are most needed.  The use of an irrevocable life insurance Trust can provide an opportunity for families to utilize the benefits of their life insurance to pay estate and other expenses as needed.

A few other points about an ILIT

Once created properly by an attorney, the trust is irrevocable and cannot be changed.  The insured person may not retain the right to revoke, alter, amend, transfer, or terminate the Trust, meaning they can’t even change beneficiaries.  The insured must be totally and completely economically disassociated from the ILIT. 

The best time to create an ILIT is before the life insurance policy is bought, and then when the life insurance application is taken, the owner of the policy is designated as the irrevocable life insurance Trust. Also, make sure you are insurable so you don’t waste the cost of creating an ILIT. 

To find a local Tax Free Retirement Specialist in your click here.

What is Life Insurance?

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“Fortunately, the life insurance industry has almost none of the problems of Wall Street… Until recently, permanent life insurance was arguably the financial industry’s most complex instrument. Fortunately, due to its complexity, life insurance is highly regulated to assure there are always sufficient, safe assets to honor its guarantees. This is referred to as statutory accounting. For more than 100 years, every life insurance death benefit has been paid.

All life insurance companies use statutory accounting. In addition, publicly traded insurance companies use GAAP accounting. It allows them to report the expected profitability of products that require reserves to back their contractual liabilities.”

Mr. Jones doesn’t take the point of view that life insurance companies can fail, several have indeed failed.  But for the other 99% of them, they have a proven track record of stability.  In fact, of those few life insurance companies that have failed, the other insurance companies bought up all of the failed companies policies.  Whole life and universal life insurance products are highly regulated for payment stability and have successfully been through good times and bad.

So let’s look at how about 99% of us struggle to make ends meet.  Many of us are in a position where we think that our lifestyle is consuming all of our earnings.  The belief is that every time we achieve a greater level of affluence, we increase the level of spending to account for that new found level of income.  There is an entire school of research called “behavioral economics” that says a human will consume what it earns or all that comes into his or her personal economy.  This is why it makes it difficult to save.  We’ve got to become better savers for our future retirement.

At www.lifeinsurancethinktank.com we educate people how to accomplish retirement savings and at the same time protect their loved ones with a life insurance product.  This can be an entirely new concept for many people who are accustomed to investing their savings in the highly volatile marketplace and losing lots of sleep watching it go up and down.

We hear that people think that insurance costs too much.  In a much published study, people know they need insurance but think they can’t afford it. However once educated on the true cost of insurance, they realize it is significantly less than they thought it was and they really can afford to protect their loved ones.  There are numerous choices of life insurance to choose from to protect and create a retirement plan; such as term life, universal, and indexed universal life insurance.

A universal life insurance policy is a perfect choice to begin a retirement plan.  Besides the obvious life insurance benefit, it force starts a savings plan that is guaranteed safe.  While term life insurance is obviously less expensive, the universal life policy is earning a higher rate of interest than any other safe investment product on the market today.  This savings element is compounded annually and if held for 10, 20, 30 or more years, it can yield a significant sum of money to supplement other retirement income sources.  Additionally, this money is tax deferred, safe from creditors in many states, has cash value you can borrow tax-free, and most likely has a living long-term care benefit.

At this point, would you say this is an expense or a savings? Is it a smart place to put your money? Any place you can save money is a smart place.  So the real question is, “is this a smarter place to put your money?”  Life Insurance Think Tank would suggest to you that buying a permanent life insurance policy that protects your family for the rest of your life is an excellent choice because it provides:

• Living benefits of long-term care should you require it while you are alive
• A death benefits when you pass away
• Tax-free payment of proceeds to your beneficiaries
•  guaranteed safe place to save money
• An excellent place to earn compounded tax-deferred interest
• The option of taking your cash out tax-free to for any purchase
• The option to take your cash tax-free to supplement your income when you retire
• Does not require you to pay it back into the insurance policy!

Permanent life insurance has stood the test of time and proven useful for a very long time.  Life insurance has been a common place for Americans to save money for decades.  But then the financial markets became all the rage to save money.  We’ve been through some difficult times with the markets and no one knows what’s going to happen in the future.  However, even during the previous rough market times, not one person who had their savings in a life insurance policy ever lost money.  Can you say that for anyone you know who was invested in the stock market?  Learn more about life insurance at www.lifeinsurancethinktank.com.  Find a Tax-Free Retirement Specialist here who can help answer your questions about creating a tax advantaged strategy for protecting your family and a retirement plan.

What is Life Insurance?

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So you’ve come to the realization that you need to buy life insurance.  You’ve read and educated yourself at www.lifeinsurancethinktank.com and have some basic ideas of what types to review with your Retirement Life Solutions Specialist.  Before you make that call, there is one more thing you might want to get together before you meet with them.  You’re going to want to have a basic understanding of how much life insurance you need to buy. 

There are many calculators on the web and they all require that you enter a lot of information.  Life Insurance Think Tank has put together a simple and effective Life Worksheet for you to gather that information onto so you can use the best life insurance calculator on the web to come up with a starting point.  More complicated situations such as businesses, land owners, high net-worth clients, estate planning etc… will always need the assistance of Retirement Life Solutions Specialist to help you create and use tax advantaged life insurance products. 

Click here to find a Retirement Life Solutions Specialist who is an expert at working with tax-free retirement products.

Download our Life Insurance Worksheet to begin your planning. 

Remember, your family is depending on you.

What is Life Insurance?

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When you’re considering term life insurance, you need to understand the different types of term life available today.  Term life is the least expensive insurance available today and if used correctly could be the best insurance for you.  In fact many people supplement permanent life insurance (universal, indexed universal or whole life) with term life insurance.

Term life insurance provides coverage for a defined term, i.e. a period of time. It does not accrue cash value like a permanent life insurance policy does. The basic premise is you have a financial risk you want to insure for a period of time in case you die prematurely.  The risk might be your mortgage, a vacation home mortgage, your children until they have moved out, kid’s college education, etc.  Once you determine what the length of time you need to cover the risk, you purchase a term life insurance policy for that period of time.  If your untimely death occurs, the insurance policy will pay your beneficiaries the tax-free insurance benefit.

There are several different types of term life insurance to consider when educating yourself on what is necessary for your specific situation.  Different insurance companies will have one or all of the following available:  Guaranteed Convertible, Annual Renewable, and Level are the common types of term life insurance.

Level Term Insurance

Level Term Insurance requires payment for a fixed period for the duration of the term.  Common terms are usually in 10-year increments because 5-year increments are more expensive than.  Premiums are level during the term of insurance and do not increase.  If you decide to cancel the policy, you just let the insurance company know, any time during the term of the policy, and stop paying the premiums and the will policy lapse. 

Convertible Term Insurance

Most companies offer convertible term insurance.  Here the insured is eligible to convert all or some of the amount of coverage to a permanent universal or indexed universal life insurance policy during the term of the insurance policy.  Most insurance companies allow this during the first 10 years of the term or possibly the first half of the term policy.  If it is converted, the premium will be higher because it is permanent insurance for the rest of your life. 

Annual Renewable Term

Annual Renewable Term is a one-year life insurance policy where the insurance company guarantees to insure the covered person for one year and will issue the same or higher policy at the end of the term without regard to health of the insured.  This is similar to a guaranteed renewable term life policy.  However, the premium will increase because the age of the insured has increased and if the amount of insurance is increased.

Return of Premium Term Life Insurance

This is the newest term life product on the market today and can be quite useful for certain situations.  First thing you need to know is that it will cost more than a standard term life policy for the same amount of insurance benefit.  The unique feature of this policy is that if you pay the premiums through the end of the policy and you are still alive the insurance company will return to you 100% of every single dollar you paid into the policy… TAX-FREE.  There are some very specific advantages for using this type of policy.  Talk with your Retirement Life Solutions Specialist before you decide to buy this type of policy.  If you cancel the policy during the term, the insurance company will not return any of the premiums to you.

Our final Thoughts

Unlike universal life insurance, term life does not provide the tax benefits or cash value buildup of permanent life insurance.  Term life insurance is useful for people who need life insurance at the least expensive price for a specified time frame.  It can also be useful to supplement a universal policy for a defined period of time. 

Besides speaking with a Retirement Solutions Life Specialist, you’ll also want to consider the following factors as a starting point:

• Are you still young and in good health?
• Are you looking for simple, inexpensive insurance to protect your family?
• Is permanent universal life too expensive for you today?

Finally, don’t be misled by a common misconception you may have heard, “buy term, and invest the rest.”  Sometimes this may not be the best choice for you with the uncertain economic times present today.  Who can afford to put their retirement money at the risk of market volatility?  If you can afford a universal or indexed universal life insurance policy, there are some excellent tax-deferred benefits you can maximize no matter what age you are.  If you are able to purchase a universal life policy at a young age, you have the flexibility to increases the cash you add to it (max fund it) and significantly increase your cash value in a safe and guaranteed method to create an additional stream of tax-free income ready for your retirement.

Make sure you speak with a Retirement Life Solutions Specialist to determine what life insurance is best for your specific situation.  Click here to find one in your area.

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Remember… “You do it For Love”

Here are a few short videos that will bring a smile, laughter, and maybe a tear to your eye about some things you may not have thought about this year as you decide what to buy your loved ones for Valentine’s Day.

What would you do for love?

Bad Cupid

A Meaningful Gift

Crazy 4 Love

We’re glad we’re able to share these heartfelt images from The LIFE Foundation’s web site with you about this year’s Valentine’s Day gift.

Thinking of you always,

Your friends at www.lifeinsurancethinktank.com

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Because of the alignment of these and other factors, this could be the best time for many years to buy life insurance.  Take advantage and protect your family at the lowest costs.  Now is the time to talk to your Retirement Life Solutions Specialist.  If you don’t have one, fill in the information on the front page of www.lifeinsurancethinktank.com and an expert specialist will answer all of your questions for you. 

Check out current rates using the best insurance rate calculator.

What is Life Insurance?

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This is one situation in which a little information might go a long way. Because people are living longer today than they used to, the cost of basic term life insurance has dropped by almost 50%.  This may be a good time to consider purchasing additional protection for your family.⁴

Preparing for a Certainty

As you know the only thing that is certain is death and taxes.  Every four years as we select a new president, and more recently the last six months of focus on the Fiscal Cliff, we spend more time focusing on the taxes we pay.  This has made it even easier to ignore the inevitable fact of death, especially when you may be young and healthy.  But wait… young and healthy is usually when life insurance is most affordable.  Even those people who may be older or have medical issues may be surprised at how cost-effective a life insurance policy might be for them.

Have you considered what would happen if you were no longer able to provide for your family due to your death?

• Would they be able to continue to have the same level of lifestyle you’ve been able to provide for them?
• Would your children still be able to pursue college?
• How would this challenge the retirement lifestyle of your spouse?

Have you done anything to prevent these concerns?  Have you had your plan reviewed recently to take advantage of the reductions in life insurance costs?  A life insurance policy with the appropriate level of coverage would help your family live the way you would like them to even if you were not around to provide for them.

Types of Life insurance

The two basic types of life insurance are Term and Permanent.  Term life insurance offers a death benefit if the insured dies within a specified time period.  Term is usually the least expensive and may offer low-cost coverage appropriate for your specific needs.

Permanent life insurance offers a death benefit on the insured person’s life as long as they continue to pay the premiums.  Permanent life insurance comes in two types, Universal or Whole life and each type can have different features.  One of the secondary benefits of these policies is the ability of the policy to build up cash value that you can use if needed as tax-free supplemental income when you retire, or other needs your family may have.

It’s common for people to have term life insurance through their work.  These plans are usually limited to a multiple of their salary.  However, when you leave your employer the coverage ends or it becomes extremely expensive to continue to keep in force.  Having your own individual policy could provide protection for your family regardless of any career changes.

What Should I do Next?

If financial concerns have held you back from obtaining the life insurance coverage your family needs, now is a good time to investigate all the available options. The best resource to learn about these options is a life insurance agent specializing in life insurance solutions.  Many times, these specialists may refer to themselves as Retirement Income Specialists or Retirement Advisors that solely specialize and assist clients in life insurance, annuity and retirement planning.

A great resource to find these specialists is Annuity123, which has a free matching service for consumers of all ages to find retirement income specialists in their area.  Once you find that professional who is knowledgeable, make sure to ask lots of questions and find out the potential pros and cons of the policies they may recommend for your specific situation.  Finally, make sure you do plenty of research and get educated on life insurance.  It could be the best thing you ever did for your family!

1, 3, 4) LIFE Foundation, 2012

2) LIMRA, 2011

What is Life Insurance?

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