Can Life Insurance Policies Solve the Estate Tax-Retirement Conundrum?

Can Life Insurance Policies Solve the Estate Tax-Retirement Conundrum?

Many top-level company executives and business owners share a common problem when it comes to planning for estate taxes and retirement. The problem is that many of these individuals wonder how they are going to both pay the necessary estate taxes while at the same time make sure that they still have sufficient funds in their retirement accounts. What to do, what to do?

There are many different philosophies when it comes to tackling this issue, but recently some new developments in the world of life insurance are proving that they could have a lot of potential in dealing with this common problem amongst the wealthy.

Retirement

Using life insurance as a strategy to overcome this problem works because it combines the benefits of financing life insurance together with the internal build-up characteristic of life insurance, which is tax-free. In the right situation using this strategy can be very effective in addressing both issues; that is managing estate taxes and having enough left over in a retirement fund.

The Estate

For example, if a business owner were to take out a life insurance policy that carries a value of $10 million and then he were to borrow about $200,000 each year for the next ten years, he would pay interest of about $25,000 a year. The loan is then completely paid off in the tenth year, which means the business owner will then have tax-free income for the next 20 years of close to $500,000 per year. That’s not all. His heirs will receive almost $12 million from the life insurance policy.

Of course, this kind of strategy has to be used correctly, which means you might want to meet with the professional tax planning experts at GROCO for help.

We hope you found this article  helpful.  If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page  or our website at www.GROCO.com.  Unfortunately, we no longer give advice to other tax professionals gratis.

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Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com.  GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.

Alan L. Olsen, CPA, Wikipedia Bio

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