Two years ago in this Geyer Law blog, we described life insurance as an “estate planning Swiss army knife”, explaining that not only can insurance take care of survivors, but that it can be used to take advantage of certain tax benefits in both personal and family planning situations.
While at Geyer Law, we do not sell life insurance, instead working with our clients’ insurance and tax advisors to formulate plans, we often discuss the benefits of Irrevocable Life Insurance Trusts (ILITs) with both individuals and business owner clients.
Special needs planning
With an important area of our practice being special needs planning, designed to help those with physical and/or mental disabilities, we often recommend funding special needs trusts using life insurance.
Advisor Ed Slott talks about avoiding the retirement tax “time bomb” through using cash value life insurance, saying that “the vehicle used to transfer money to the next generation will have to change from the IRS to the more tax-friendly life insurance.” Slott is referring to the fact that life insurance more tax-friendly than tax deferred retirement plan money, because insurance proceeds paid to a trust after death are income-tax free.
At Geyer Law, our team helps with many aspects of business law, including buy-sell agreements and employment contracts. Life insurance is used to fund buy-outs, as well as to fund incentive plans to retain top-level employees. Using life insurance as the funding mechanism to provide additional compensation to valuable employees simultaneously offers important tax benefits to the employer while avoiding the complications that can arise in establishing a qualified plan,” Think Advisor points out.
Funding source for business loans
The benefits of a life insurance loan for an entrepreneur are no credit or background checks, flexible payment schedules, and lower interest rates. Cameron Keng explains in Forbes.
At Geyer Law, we often help clients use life insurance to “fill in the blanks”.
– by Rebecca W. Geyer