BUSINESS & FINANCE :: JUNE/JULY 2008
Leave a Financial Legacy
A Life Insurance Policy Can Help Provide Certainty in the Amount Your Loved Ones Receive
If you’ve retired and are fortunate enough to have accumulated assets that you do not expect to need in your retirement years, you may be thinking of a way to pass some of those assets to loved ones or charity1. One way to achieve peace of mind is by using a portion of your assets you don’t expect to need in retirement to purchase a universal life insurance policy with a single premium2. The life insurance policy provides a death benefit to the beneficiaries you’ve specified upon your death. This may be right for you if:
- You want to be certain that a specific amount will pass to your children, grandchildren or charity.
- You are retired, between the ages of 56 and 80, and are in good health and have medical insurance.
- You are willing to take a medical exam to qualify for life insurance.
- You have assets you do not expect to need in your retirement years.
- Your net worth exceeds $250,000 but is less than the current amount not subject to federal estate tax ($2,000,000 in 2007 and 2008).
The purchase of a life insurance policy using current assets for the purpose of leaving a legacy can benefit you in many ways:
- Avoid Probate. Because life insurance passes outside of an individual’s will (provided the estate is not named beneficiary), the amount paid to your beneficiaries avoids the time and expense of probate.
- Avoid Losses Due to Market Risk. Your beneficiaries will receive a specific amount when you die, no matter what happens in the investment markets.
- Retain Control of your Estate. As long as the life insurance policy is individually owned, you retain control and can change the beneficiary at any time.
As with any important financial decision, you should speak with a licensed financial professional to see if using a life insurance policy to create a legacy is the right approach for you. Be sure to consider all of your options and any risks.
This may not be well suited for you if you may need access to these assets to fund current or future living expenses such as health care costs, long-term care or increased living expenses in retirement.
There may be costs associated with the sale of assets to purchase insurance.
For those who are good candidates, the idea of leaving a life legacy through a life insurance policy can offer peace of mind for you and a secure future for those that matter most to you.
1: Charitable organizations are acceptable as beneficiaries if the purchase of insurance is sensible considering the proposed insured’s insurance needs and if the proposed insured has a previous history of donating to the charity (either monetary or non-monetary).
2: Federal tax law limits the amount of premium contribution that can be made to a contract in order for it to retain certain tax advantages. When premium contributions exceed this limit, the contract is classified as a modified endowment contract (MEC). Distributions from MECs (such as loans, withdrawals and assignments) are taxed less favorably than distributions from contracts that are not MECs. A federal income tax penalty may apply for distributions from a MEC made prior to age 59½. However, death benefits are still generally received income tax free pursuant to IRC § 101(a). Please consult a tax advisor.
Life insurance is issued by The Prudential Insurance Company of America, Newark, NJ and its affiliates. All are Prudential Financial companies located in Newark, NJ, and each is solely responsible for its own financial condition and contractual obligations. [In FL and UT add: Our policies, contain exclusions, limitations, reductions of benefits and terms for keeping them in force. Your licensed financial professional can provide you with costs and complete details.}
Kenna Ulbinsky-Yakal is a Financial Services Associate with The Prudential Insurance Company of America, located at 200 Continental Drive, Suite 104, Newark, DE 19713, 302-894-1689 x2247.
IFS-A139433 Ed 10/07, Expires 4/23/2009
