5 Signs You Should Use Life Insurance to Leave an Inheritance
Will your loved ones receive an inheritance after you die? This question becomes increasingly prevalent as you age and became more aware of your mortality. Whether you’re leaving behind a modest sum or a massive estate, you want your heirs to have access to the money and/or property you worked so hard to attain throughout your lifetime.
If you currently feel you might not be financially capable of leaving an inheritance, you’re not alone. A recent survey by GoBankingRates found that 69 percent of Americans had less than $1,000 in savings.
25 percent of Americans have absolutely nothing in their savings account! These numbers are startling, to say the least, which is why JRC Insurance Group is adamant about educating Americans on how life insurance can be used to leave an inheritance.
Here are five signs that life insurance is your best bet to leave a sizable sum of money to your spouse or heirs when you die.
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Retirement should be a time to unwind and enjoy life, yet many retirees live a muted retirement because their savings are also the inheritance they plan to leave behind.
According to financial research firm, Hearts & Wallets, 28% of people age 65 and older with at least $100,000 in savings withdrew less than 1% from their accounts. Money Magazine debunks the inclination to be “unnecessarily frugal” in an article titled, “Why You Should Spend More Money in Retirement.” The piece offers a couple of solid strategies to “relax and enjoy” retirement but leaves out perhaps the strongest option: life insurance.
What if you could use your retirement funds to travel the world, visit family near and far, buy a vacation home, or just live less frugally? With a guaranteed universal life insurance (GUL) policy, you can. And not only that, the money you leave behind in your GUL is tax-free, unlike the savings you would leave behind otherwise.
Guaranteed universal life insurance is a form of permanent life insurance that functions similarly to term life - meaning it provides fixed premiums for a set period of time, usually at an affordable rate. The main difference between GUL and term life is that GUL provides coverage up to a specified age rather than a specified number of years.
You can secure coverage up to the age of 121, and let the death benefit serve as an inheritance—no more feeling guilty every time you make a dent in your savings. For deeper insight on this strategy, see our previous article, “Spend Your Retirement Savings and Still Leave a Legacy, Tax-Free.”
If you’re in your 60s or later and have not yet built up an inheritance to leave to your loved ones, chances are that starting now would be difficult. This is a time when your finances should be loosening up, not becoming more stressful. Here’s an example to illustrate why life insurance is a better way for retirees to save:
John is 67 years old and has two grandchildren. He wants to leave $50k to each grandchild when he dies. He expects to live to age 90 or later based on life expectancy calculations relating to his family history and current health.
If John started saving today, he would have to put away $362 each month to reach his $100k goal ($50k for each grandchild). Meanwhile, a GUL policy to age 95 with a $100k death benefit (John’s “magic number” that he wants to leave behind) would cost $186 per month. Life insurance saves him $200 per month compared to what he would have to save outright. That’s $200 back in his pocket each month, or invested elsewhere.
To learn more about guaranteed universal life insurance, click here or call JRC toll-free at: 855-247-9555 to speak with one of our experienced agents.
To the contrary, those who have saved all that they wish to leave behind in addition to their retirement funds are essentially “self-insured” and might not need a comprehensive policy. However, final costs and burial expenses can run high, so many self-insured clients opt for what’s called a final expense policy.
Final expense policies typically carry death benefits between $5,000 and $50,000. Just like all other life insurance policies, the money is paid to your beneficiaries tax-free, in a lump sum if they wish, or in monthly installments. The two main things to look for in a final expense policy are a fixed rate and coverage for your entire lifetime.
Many final expense policies offer a low introductory price but double your rates every 5 years, until your policy becomes unaffordable. Other final expense policies cancel on your 80th birthday leaving you without life insurance coverage when you need it the most. For assistance with choosing a final expense policy that offers level rates until the age of 100 or later, call JRC at 855-247-9555.
Life insurance is also purchased to protect estates for high-net-worth families. This can be through individual policies or lower cost “second to die” coverage (meaning heirs receive the death benefit after both spouses on a policy die).
If your estate is valued at more than $12,060,000 as of 2022, it may be subject to taxes of up to 40 percent of the amount above the exemption. These estate taxes are charged in addition to any state taxes your heirs may also be responsible for, and they must be paid within 9 months of your passing.
To minimize or eliminate the tax burden for your heirs, you may wish to consider permanent life insurance to cover taxes and the cost of an estate settlement. Here’s a real-life example from one of our previous articles:
We recently worked with an older gentleman who lives in the Mid-Atlantic U.S. with his wife. He uses life insurance for estate planning, to effectively shield his two children from estate taxes down the road.If you’re considering using life insurance for your estate planning needs, be sure to avoid these 7 common mistakes.
The client was originally working with a large, well-known non-profit in hopes of getting a third second-to-die life insurance policy. After becoming frustrated with the organization’s lack of responsiveness, he searched online for a life insurance agent and found us.
After shopping more than 50 top insurance carriers to find the right solution, we were able to help him funnel the cash value from his two second-to-die cash accumulation accounts toward one policy. This allowed him not only to condense his life insurance from a prospective three plans down to one, but also secure 15% more coverage and save roughly $24,000 per year in premiums—all at zero extra cost.
Now, he pays no monthly premiums and has peace of mind knowing that his life insurance is aligned with his estate taxes. He was even able to put the residual money he was going to spend on a third policy into a trust fund instead.
Shopping for life insurance presents an opportunity to take a step back and align your financial planning with your desire to leave an inheritance to your family. Remember, term life insurance should not be used to leave an inheritance, because there is a good chance you will outlive your policy. Most term life insurance policies end coverage before the age of 80, and the majority of life insurance companies will stop offering coverage after the age of 75.
Do you already own a term life insurance policy? Depending on your current age, some life insurers will offer the option to convert your existing term life insurance into a permanent policy. If you have some health issues, this is probably the best value for you, but if you’re in average or better health, purchasing a new GUL policy will probably save you money in the long run.
We Can Help With Your Life Insurance Needs
JRC is here to help you plan for your family’s future. We understand how important it is to put your loved ones in a position to carry on financially after you die, and we are 100% committed to helping you find a policy that enables you to do so. We offer more than 60 years of collective experience and we’ve helped thousands of clients with their life insurance needs.
Call us today, toll-free at: 855-247-9555 so we can walk you through the options available to you. You can also request a free quote below to instantly compare rates from dozens of top-rated life insurance companies. Our goal is to provide you with the most affordable options and the best customer service in the industry.
Managing Partner and Co-founder
Cliff is a licensed life insurance agent and one of the owners of JRC Insurance Group. He has helped thousands of families of businesses with their life insurance needs since 2012 and specializes with applicants who are less than perfect health. In his spare time he enjoys spending time with family, traveling, and the great outdoors.