ESTATE TAX PROTECTION
Not only is it good to plan for your own retirement and lifetime financial security, it is also good to plan to protect the estate you want to leave to your loved ones, to your church or to a favorite charity. The "death tax" in the United States can eat up a substantial portion of larger estates. Additionally, some states impose their own inheritance taxes so the sizable estate you plan to leave to your loved ones can shrink by 50% or more! Additionally, in our current economic situation with its multi-trillion dollar deficit, the government must find ways to raise money. Taxes are the easiest way to do that and increased estate taxes are a possibility.
Unless changed by the end of 2012, estate tax rates are scheduled to revert back to pre-2001 levels. This means that only the first $1,000,000 of an estate is exempt and anything above that is taxed at 55%. Thus an estate with a value of $2,000,000, will owe $550,000! It is possible your loved ones will only receive about 72.5% of the estate you planned to leave them.
$2,000,000 minus $1,000,000(exemption)=$1,000,000 times 55% = $550,000 due to Uncle Sam!
Many people say, "My estate is not worth that much so I do not have to worry." Think about the value of your home when it is paid off, other properties you may own, the value of stocks and other investments, life insurance proceeds you could get if your spouse dies before you, etc... Many estates can easily be valued at over $1,000,000.
How do you protect this inheritance? One strategy to make sure your loved ones get the full amount of your estate is to insure your life in an amount equal to the estimated tax liability of your estate when it is passed on. In this plan, upon your death, the insurance company will write a tax-free check to your beneficiary in the policy amount. When Uncle Sam comes calling to collect estate taxes, your beneficiary simply hands over the amount of the life insurance check and your full estate is transferred. In the scenario above, you would have needed a life insurance policy with a face amount of $550,000. That could cost less than $100 a month!
Finding the right life insurance policy is also important. Look for a policy that provides living benefits. In this type of policy, not only does the insurance protect your estate upon your death, it can also provide assistance while you are alive, providing "living insurance." This living insurance can be invaluable in protecting your estate in cases where you can no longer earn income in instances of chronic, critical and terminal illness.
These benefits include early payout in many cases for:
- Chronic illness: Provides 2% of your policy amount monthly to help in your care
- Critical illness: Can pay out up to 90% of your policy amount while you are alive
- Terminal illness: Provides up to 100% of your policy amount to assist in your final days
As you know, life insurance rates generally increase with your age so it is extremely important to lock in affordable rates as early as possible. For more information on how we can help you transfer 100% of your estate to your loved ones, email us at firstname.lastname@example.org.