Insurance Strategy: Wealth Transfer Transfer your wealth efficiently
When you consider the years of effort you invest in accumulating your assets, you want to make sure those assets pass on to the next generation as efficiently as possible. Cash value life insurance is a unique tool that can help you transfer your wealth more efficiently, by taking advantage of certain tax benefits. It can allow you to pass on more of the dollars you’ve worked so hard to accumulate to those you love, or causes important to you.
A tax-efficient wealth transfer strategy
Cash value life insurance is a unique financial tool that can help you grow more assets and pass them on to loved ones and important causes while potentially reducing erosion due to taxes.
One tax-efficient wealth transfer strategy is repositioning a taxable asset into a tax-deferred asset, such as a cash value life insurance policy, to potentially create new wealth that previously didn’t exist. When properly structured, the tax benefits include:
- Tax-deferred growth of cash value in the policy
- Tax-free access to the policy’s cash value
- Income tax-free transfer of wealth in the form of a death benefit
Thereby allowing you to pass on a greater inheritance.
Before you purchase cash value life insurance, be sure to consider the policy’s features, benefits and fees, and whether it is appropriate for you based on your financial situation and objectives.
Using a life insurance policy to transfer your wealth
Life insurance offers the unique advantage of repositioning an asset that can be a tax liability into one that has the potential to grow to create more wealth and pass on to the next generation tax-efficiently. Using life insurance to transfer your wealth lets you:
- Increase your financial legacy – The death benefit you leave passes on income-tax free to beneficiaries, allowing you to potentially pass on a greater after-tax inheritance.
- Reduce taxes – Assets like CDs, stocks, bonds and mutual funds typically generate taxable earnings and may be taxable each year or when you access the asset. You can reduce ongoing taxation of these assets by repositioning the assets, or a portion of them into life insurance.
- Create new wealth – Because it’s replacing a once idle, taxable asset, a cash value life insurance policy that grows tax-deferred can potentially create wealth where it previously didn’t exist.
Any type of permanent, cash value, life insurance can be used for this strategy, but certain policies may make more sense depending on your goals. Work with your Ameriprise financial advisor for what will work best for your situation.
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