Estate planning can be approached in two different ways. You can stay in the present without any particular legacy plan and resolve to leave behind anything that may be left after your passing.
The alternative is more intentional and comprehensive. Some people have specific legacy goals, and they want to make sure that they protect the well-being of their loved ones every step of the way.
If you fall in the latter category, life insurance can be quite useful, and we will take a look at the subject in this post.
Whole Life Insurance
There are a number of different hybrid forms of coverage, but there are two forms of life insurance that are most commonly utilized, and whole life is one of them. This type of coverage accumulates a cash value when you pay your premiums.
As a result, you satisfy multiple objectives at once when you have whole life insurance. It serves as an investment vehicle, and you can make withdrawals or take a loan against the cash value, so it is a safety net.
Of course, there is a death benefit that will protect your loved ones if you pass away before your time, and it will bolster your legacy if you enjoy a normal lifespan.
Because of the guaranteed return, the premiums are relatively high. The average monthly premium for $250,000 of coverage for a healthy, non-smoking female that is between 35 and 45 is in the $245 to $349 range.
Term Life Insurance
Term life insurance is insurance that provides a death benefit, but there is no cash value. If you live beyond the expiration of the term, you did not receive anything for the money except peace of mind.
However, the knowledge that your family will be okay financially if you pass away is worth the nominal cost, because the insurance is inexpensive. For a 35-year-old woman living in Rochester, a $250,000 policy would cost between $18 and $26 a month depending on the health of the applicant.
Buy-Sell Agreements
Small business partners have a succession challenge, and it can be met through the utilization of a buy-sell agreement.
With the agreement called a cross purchase plan, the partners purchase life insurance policies on one another with benefits that will equal the value of a share of the business. When a partner dies, the proceeds are used to buy the deceased partner’s share from their estate.
There is also an entity redemption agreement that involves the business as an entity purchasing a life insurance.
It should be noted that buy-sell agreements can be used to allow partners to step away from the business for any reason, and the funding does not necessarily have to come from life insurance.
Inheritance Balancing
The other scenario we will look at here is inheritance balancing, and we will explain it by way of example. Let’s say that John is the owner of a car dealership. His daughter, Lisa, joined him to help run the business after she received her MBA.
Brett, who is his other child, went in a different career direction. John is going to leave the car dealership to Lisa, and it is his most valuable piece of property. At the same time, he wants Brett to receive an equal inheritance.
John can take out a life insurance policy with a payout that is equal to the value of the inheritance that Lisa will receive. He can make Brett the beneficiary, and he will be providing equal inheritances to both of his children.
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Personalized attention is the key to a properly constructed plan, and this is what you will receive when you choose our firm.
You can schedule a consultation appointment right now if you call us at (585) 546-1734, and you can fill out our contact form if you would rather send us a message.
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