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Helping to Secure Your Estate in an Insecure Market

The current Administration is looking for ways to reduce the Federal deficit and is currently targeting the Estate Tax and Life Settlements among other insurance-based planning tools.  The deficit reduction package could turn the Federal estate tax clock back to 2009. 

 

This recent proposal could impact life insurance through two provisions: 

 

“One is supposed to raise $1 billion over 10 years by keeping buyers of life insurance policies from avoiding income taxes on the death benefits.

 

Another provision, which is supposed to raise $5 billion, would modify the dividends-received deduction for life insurance companies’ separate accounts.” 1

Understanding the role of life insurance in estate planning is critical as the U.S. continues to experience major changes in its Federal Tax policies.  Life insurance protects your family’s lifestyle in the event of your passing through the creation of an immediate tax-free estate and can also act as an excellent estate planning device.  The value for the policy owner is more peace of mind in knowing that the death of the insured will not create financial hardship and/or that his/her estate will remain intact. 

 

(CLICK HERE for detail in a September 19, 2011 National Underwriter article.)

(CLICK HERE to read a September 20, 2011 article in the Wall Street Journal on this topic.)

 

The provisions noted above would allow for more taxation of Americans’ financial and retirement assets.  Though it is uncertain if the proposal will pass legislation, it is critical to evaluate the role life insurance can play as an estate planning vehicle and to assess the potential impact of taxation on your estate if the proposed legislation passes.   

 

NOW is the time to meet with an experienced and knowledgeable insurance producer or advisor who understands the complexities of estate taxation and who can provide insights on the various types life insurance products available to help plan your retirement.  Through the use of appropriate strategies and solutions, you and your beneficiaries could pay significantly less in taxes and maintain more peace of mind even in the current economic environment.

 

If it’s been more than 12 months since you last had a tax reduction analysis completed, we strongly encourage you to schedule one now.  While current legislation is out of your hands, your estate and your wishes of what is to be done with it are still within your control.   

 

This material has been prepared for informational purposes only.  It is not intended to provide legal, accounting or tax advice. You are encouraged to consult a tax professional specializing in these areas regarding the applicability of this information to your situation.  If you are not currently affiliated with a tax professional, simply contact us today as we would be happy to recommend an individual for these services. 


1 http://www.lifeandhealthinsurancenews.com/News/2011/9/Pages/Obama-Team-Targets-Estate-Tax-DRD-COLI-Life-Settlements.aspx. Accessed Sept. 23, 2011.

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