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Maintain surviving family's lifestyle - by paying off debt and providing a a lump sum of cash which they can draw from in the event of your death.
Divide and distribute your estate equitably - for example, you could have someone be an heir to your business that may be worth a couple million and provide another heir a couple million in life insurance proceeds.
Reduce or eliminate gift and estate taxes - for example, a member of senior generation transfers their residence to a Qualified Personal Residence Trust (QPRT), the residence eventually passes to the junior generation without any additional gift tax - as long as the grantor survives the specified retained term; junior generation purchases life insurance policy insuring senior generation to insure against the risk that the residence may be brought back into the grantor's estate if the grantor dies during the retained term. Similar programs can be set up for Grantor Retained Annuity Trusts (GRATs), Family Limited Partnerships (FLPs), Private Annuities and many others.
Solve liquidity needs - to pay for administrative costs, gift and estate taxes. Often times estates are composed of non-liquid property or property such as collectible artwork, jewelry and other family heirlooms that heirs may not wish to sell to pay expenses. Life insurance can be used to provide the necessary liquidity to pay the expenses associated with your estate.
The above examples are only the tip of the iceberg. There are many more ways in which life insurance can be used to solve issues associated with estate and gift taxes. Only a professional can help you determine which planning techniques are appropriate for your situation. So, it is important to work closely with a Life Insurance Professional and CPA.
The concepts contained herein are not intended to serve as advice and may have legal, tax and accounting implications. Consult your Attorney and CPA for advice
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