March 20, 2015
Imagine having a thriving family business that you would like to leave to your heirs. In your estate planning, however, you discover that your estate will be subject to a $10 million tax bill. The only way for your estate to pay this tax liability, in the absence of additional advance planning, may be to sell the family business you wish to pass on.
Or, maybe you want to leave your children a substantial piece of land. While you expect them to sell some of it to cover taxes, you don’t want them to be forced into a fire sale, where they have to take any offer just to liquidate as quickly as possible. Fortunately, there is another way to address these potential liabilities and liquidity needs.
Life insurance can be both a tax-efficient and cost-effective source of funds for addressing these issues. Many high net worth individuals use life insurance and trusts in their overall estate plan to help preserve their estate from tax liabilities and other expenses. To pay for these premiums, life insurance premium financing may be an attractive option, especially if there are other assets and tax considerations.
How It Works
Life insurance premium financing is a way to fund the premium payments associated with a large life insurance policy without significantly impacting current liquidity or cash flow. “It can work incredibly well in business estate planning, as well as for individuals who are charitably inclined,” says Carol Goetsch, Head of Insurance and Retirement Plans for U.S. Bancorp Investments, Inc., an affiliate of U.S. Bank.