Elizabeth M. Smith, CRPC®

Federal estate taxes are due 9 months after the date of death. The death benefit from insurance can provide the liquidity to pay the estate tax and alleviate the need to borrow against or sell all or some of the assets in the estate at an inopportune time. Otherwise, the beneficiaries will have to create liquidity- which could result in a taxable event.

If someone knows they want to leave a specific amount of money to the next generation and/or is unsure of the wealth they might accumulate during their lifetime, insurance may provide some security with regard to transferring wealth from one generation to the next.

• Intergenerational wealth transfers may reduce or eliminate estate taxes by not only getting assets out of the first generation's future estate through gifting, but also by funding the purchase of insurance to provide a death benefit to pay estate taxes, if any. It is critical for the insurance policy to be excluded from the estate through the use of a trust so that the death benefit will not be included in the first generation's estate and therefore will not be subject to estate tax.
• By making the second generation beneficiaries to the death benefit (rather than gifting to the next generation during the policy holder's lifetime), the policy holder may gift a specific amount while also retaining their assets to support their current lifestyle throughout their life. Furthermore, the life insurance can be federal income and estate tax free if held in a properly drafted irrevocable life insurance trust.

• Estate equalization using insurance may be appropriate for blended families, or in situations when a family has assets that are meant to benefit a specific individual but, in doing so, would disinherit one or more of the beneficiaries of the estate.
• For example, one child runs the family business that compromises the majority of the parent's estates and the other children are not active in the business and have no interest in participating. Another example, includes proceeds from a life policy are left to the children of a prior marriage to ensure that those children don't have to wait for the surviving step-parent to pass in order to receive their inheritance.

In some circumstances, you can use insurance policies with a cash value to access that cash through withdrawals. This is a customized solution, meaning one policy strategy will not fit all financial situations, so it's important to consult a financial professional or Insurance Planning Director prior to investing to ensure you most effectively reach your goals.

Another great use of insurance is using the death benefit of a policy to reach your philanthropic goals. Using the death benefit of insurance policies, you can designate a charitable organization of your choosing to become a beneficiary, resulting in a sizeable donation to that organization upon your death. Doing so can be an easy way to save over time for the causes that matter most to you, but it's important to consult a financial advisor or Insurance Planning Director to ensure that you're choosing the insurance solution most suited to your goals.

If you have any questions about insurance solutions, or how you can use them to effectively achieve your financial goals, please don't hesitate to reach out.