Passing Assets to Loved Ones EfficientlyCurtis Johnston, Financial Advisor, Univest Investments, Inc.
When we leave this world, we ideally would like our remaining assets to be transferred to our intended beneficiaries with ease and without the IRS taking taxes. One of the easiest and most tax-friendly transfers can be through the use of life insurance, because life insurance is paid to the beneficiaries without the costs and aggravation of probate. Additionally, if ownership is structured properly, the proceeds are not subject to federal estate taxes.
Here are some examples of where life insurance can provide an efficient transfer of assets:
- If you do not want to withdraw more than what's required by the IRS from your retirement assets and you hope to leave your retirement assets to children or grandchildren, then you may want to consider using a portion of your taxable retirement assets to purchase life insurance in order to leave your beneficiaries more of an inheritance and less of a tax bill. For example, a 70½-year-old female would be required to take more than $9,100 from her $250,000 IRA in the first year of her required minimum distribution. The same individual in average health could buy a $250,000 permanent life insurance policy for about $8,900/year ($7,100/year or less if in good health). If she passes away early on, the beneficiaries would receive the IRA plus the life insurance.
- Leaving a home to heirs is a wonderful thing, but inheritance taxes are usually due within nine months after the date of death. Many times houses are being sold for much less than market value just to pay the taxes that may be due. Currently in Pennsylvania the inheritance tax is 4.5%, which means a home worth $200,000 would require the beneficiary to come up with $9,000 in a short period of time. If a life insurance policy was in force, the beneficiary could save thousands of dollars by not having to sell the property so quickly.
In closing, if you have existing life insurance policies, we suggest reviewing them to ensure that they are titled correctly, have the correct beneficiaries, are not in danger of lapsing and are competitively priced. If you wish to have your life insurance policy reviewed, an experienced financial advisor at Univest Investments can assist. Contact us at 215-721-2112 or firstname.lastname@example.org.
Investments and insurance products are offered through Univest Investments, Inc., member FINRA and SIPC, a licensed subsidiary of Univest Corporation of Pennsylvania. They are not FDIC insured, are not a deposit of or bank guaranteed, and are subject to risks, including possible loss of principal amount invested. Consult a tax advisor regarding what may be best for your personal situation.