"We have $50,000 in a CD at the bank just for the kids. You know, so that when we're gone, the 5 of them will get $10,000 each."
"Since my wife died, I've decided to name my kids as the beneficiaries of my IRA's and 401k. I'm also leaving my life insurance death benefit to my Church."
These are just two examples of conversations I've had recently with different clients. Both ideas, both statements, seem like worthy and noble efforts. However, they show me one of two things. Either these clients don't, or at least didn't, understand the power of life insurance or they've been scared away from life insurance by the talking heads of financial genius on the radio or internet.
My goal as a life insurance agent is first and foremost education. So let's take a look at each scenario and see what we could do better...
EXAMPLE ONE
In example number 1, the couple with $50,000 in a CD, there are a number of issues.
a) The CD is probably not paying them very much in interest.
b) What they are gaining is taxable each year unless it's in an IRA CD.
c) If the money is needed for an emergency, there will be penalties for removing it from the CD.
So, how can life insurance help with example number 1?
a) If used to purchase a single-premium policy on the life of husband or wife (age 65) it would provide somewhere between $97,000, if on the husband, and $106,000, if on the wife, of income tax free money for the kids (or grand-kids). So instead of $10k they may get nearly $20k. By moving it from a CD to life insurance they were able to nearly double what they wanted to leave to their children. In addition, that death benefit may grow each year. In the case of the wife, in year 20 the benefit has grown to roughly $134,000
b) The life insurance cash value grows at a guaranteed rate and the money is accessible, in the form of a loan, without penalty.
EXAMPLE TWO
Leaving money to your kids and your favorite charity are great ideas. Why not pay forward the gifts you have received in this life? However, the example listed above is simply backwards.
Leaving your IRA or 401k to a non-spouse like a child seems like you are leaving them a fortune, and you may be, but you may also be leaving them a massive headache where one false move can cost them much of what you meant to leave behind.
A better option is to leave the complicated items like the IRA or 401k to the charity and it's experts to process. You may also qualify for a tax deduction. Leaving life insurance to those you love is fairly clean and straight forward where in most cases they simply get a check free and clear.
"Since my wife died, I've decided to name my kids as the beneficiaries of my IRA's and 401k. I'm also leaving my life insurance death benefit to my Church."
These are just two examples of conversations I've had recently with different clients. Both ideas, both statements, seem like worthy and noble efforts. However, they show me one of two things. Either these clients don't, or at least didn't, understand the power of life insurance or they've been scared away from life insurance by the talking heads of financial genius on the radio or internet.My goal as a life insurance agent is first and foremost education. So let's take a look at each scenario and see what we could do better...
EXAMPLE ONE
In example number 1, the couple with $50,000 in a CD, there are a number of issues.
a) The CD is probably not paying them very much in interest.
b) What they are gaining is taxable each year unless it's in an IRA CD.
c) If the money is needed for an emergency, there will be penalties for removing it from the CD.
So, how can life insurance help with example number 1?
a) If used to purchase a single-premium policy on the life of husband or wife (age 65) it would provide somewhere between $97,000, if on the husband, and $106,000, if on the wife, of income tax free money for the kids (or grand-kids). So instead of $10k they may get nearly $20k. By moving it from a CD to life insurance they were able to nearly double what they wanted to leave to their children. In addition, that death benefit may grow each year. In the case of the wife, in year 20 the benefit has grown to roughly $134,000
b) The life insurance cash value grows at a guaranteed rate and the money is accessible, in the form of a loan, without penalty.
EXAMPLE TWO
Leaving money to your kids and your favorite charity are great ideas. Why not pay forward the gifts you have received in this life? However, the example listed above is simply backwards.
Leaving your IRA or 401k to a non-spouse like a child seems like you are leaving them a fortune, and you may be, but you may also be leaving them a massive headache where one false move can cost them much of what you meant to leave behind.
A better option is to leave the complicated items like the IRA or 401k to the charity and it's experts to process. You may also qualify for a tax deduction. Leaving life insurance to those you love is fairly clean and straight forward where in most cases they simply get a check free and clear.
You may also consider the various ways to transfer that taxable money into a life insurance product thus leaving both the charity and your family income tax free, and headache free, money!
If you're IRA or 401k is larger than your life insurance policy or vise versa, talk to your tax advisor and insurance agent about how to make sure your wishes are fulfilled for both your charity and your family and how to adjust those tools to fit your desires.
If you're IRA or 401k is larger than your life insurance policy or vise versa, talk to your tax advisor and insurance agent about how to make sure your wishes are fulfilled for both your charity and your family and how to adjust those tools to fit your desires.
In the above case, moving your money to a Charitable Gift Annuity and using some of your annual payout to purchase a life insurance policy for those you leave behind may be the perfect answer.
Let's start a conversation about insuring your love!
Phone: 740-324-0702
Email: hahnjamesm@gmail.com
Social: #JHAHNCOF
"When considering purchasing Life Insurance from an agent - service, knowledge, and reputation is just as important price."
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