Why Do Wealthy People Need Life Insurance?

Over $200,000,000 of life insurance was sold recently to a billionaire in Silicon Valley. This is a record-setting life insurance policy. Prior to this, David Geffen was the person who bought the most amount of life insurance in 1990. It was a $100,000,000 policy. Click here to read a good article that talks about this new record-breaking policy.

The size of this policy begs the question, why would well-educated, smart, successful, wealthy people buy life insurance? If somebody dies, there is plenty of money for the family. Life insurance for the wealthy is a tool with a multitude of uses.

From a tax perspective life insurance is good because:

1. The death benefit is tax-free.
2. The cash values grow tax-free.
3. Inheritance taxes can be avoided by having the policy owned outside the estates of the insureds and will pass potentially to the next generation, and maybe even other generations, without ever being taxed.

Life insurance can be used for:

• Estate liquidity
• Business succession planning
• Creditor protection
• Charitable Planning
• Equalization of the estate between children

All of these make life insurance a strong choice and a very useful tool that estate planners can utilize for their clients.

Recently we went over all the different tools that could be utilized in a client’s estate plan. One was an irrevocable life insurance trust funded with life insurance. With this trust, the family would not have to liquidate their properties or businesses to pay the tax, which, between federal and state inheritance or estate taxes, could be be as much as 40%-50%.

In spite of the fact that you may have significant wealth, your estate plan may be lacking if it doesn’t include life insurance. If you have any questions about your plan, please give us a call. We would be happy to talk with you.

Registered Representative offering Securities through American Portfolios Financial Services, Inc. (APFS) Member FINRA/SIPC. Investment Advisory Services are offered through G&G Planning Concepts, Inc. which is not affiliated with APFS.

Any opinions expressed in this forum are not the opinion or view of American Portfolios Financial Services, Inc. (APFS) or American Portfolios Advisors, Inc.(APA) and have not been reviewed by the firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.

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