Brian Gruss Licensed Insurance Planner

Single Premium Whole Life: A Powerful Legacy Tool

As you grow older and join the “seniors” club, you may start thinking about what you want to leave behind once you’re gone—particularly if you’ve accumulated a significant amount of money over the years. Like most seniors, you’ll probably want to pass along some of this hard-earned money to your children, grandchildren, your church or even a favorite charity.

Luckily, there is an effective life insurance product designed to help seniors leave behind a legacy. It’s called single premium whole life (SPWL) insurance. A SPWL policy allows you to increase your estate value and provide your beneficiaries with an inheritance that’s potentially immune to federal taxes.

Countless advantages

Because of the many benefits SPWL policies have to offer, this type of insurance is growing increasingly popular among seniors. By simply placing a portion of your invested assets into a SPWL policy, you can reap the following rewards:

• Immediately increase the value of your estate
• Easily pass money directly to your beneficiaries, allowing them to avoid probate courts
• Provide an inheritance to beneficiaries that may be free of taxation
• Create a guaranteed lifetime death benefit
• Have the ability to receive the SPWL death benefit in the event of a catastrophic illness
• Avoid risk, even within a volatile market
• Pay a one-time premium without the need for renewals
• Access guaranteed cash values without penalty after the first policy for financial emergencies (Depending upon the policy provisions)

Are you an ideal candidate?

If you want to leave an inheritance to your loved ones or a charity, and you’ve already designated a portion of your assets to do so, you’re the ideal candidate for a SPWL policy. Obviously, you should never use any funds that are necessary for daily living expenses to buy a SPWL policy. However, you may want to tap into liquid assets, such as CDs, money market accounts and treasury securities, which are ideal for purchasing a policy.

Incredible tax savings

If you invest in mutual funds, stocks or even CDs, savings bonds and money market funds, the growth of your assets is subject to taxes. However, transferring your assets to a SPWL allows you to set up an inheritance that’s potentially free from federal income tax. That’s because death benefits from life insurance policies are generally not taxable.

Plus, as long as you properly designate beneficiaries on the SPWL policy, your heirs will avoid probate court. Obviously, you’ll want to work closely with Brian Gruss to ensure that your beneficiary designations are set up correctly.

A case study

Here’s an example of how a SPWL policy can greatly benefit both you and your beneficiaries: Let’s say 65-year-old Betty, who is a non-tobacco user, plans to leave a CD worth $50,000 to her grandchildren when she dies. When she decides to transfer this $50,000 from the CD to a SPWL policy, she’s able to purchase a guaranteed life death benefit worth $98,814. In other words, Betty has just increased this portion of her estate by nearly 50%, doubling the inheritance for her grandchildren.

Additionally, the death benefit will likely be free of income taxes for her grandchildren. On top of that, Betty no longer has to pay tax on the interest earned for the CD.

An effective legacy tool

Considering these countless advantages, it’s clear that a SPWL policy is an effective way to leave a legacy behind. If you want to protect your assets from taxes and increase your inheritance values, ask Brian Gruss about SPWL insurance.

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Steer Clear of Estate Taxes with Survivorship Life

Depending on the value of your estate, your heirs could face hundreds of thousands of dollars in federal estate taxes. In 2008, the first $2 million of an estate is exempt from estate taxes, and this amount will rise to $3.5 million in 2009. Luckily, the estate tax is scheduled to be eliminated altogether in 2010.

But unless Congress makes a change, the estate tax will be back with a vengeance in 2011—with a much lower $1 million exemption amount. This means an even greater number of families will be burdened with estate taxes upon the death of a loved one. When faced with these often sky-high estate taxes, some families are forced to sell inherited assets, such as a house or car, just to pay off these taxes.

Removing the burden with life insurance

Fortunately, there is a way to ensure your loved ones can receive the inheritance that is rightly theirs: life insurance. That’s because the proceeds from a life insurance policy can be used to pay estate taxes. This removes financial burden from your family and ensures they aren’t left scrambling to raise money for estate taxes.

However, traditional life insurance is far too expensive for many families. It can also be difficult to qualify for a policy, depending on your age, health and lifestyle. For example, if you have a pre-existing health condition, you may not be able to get conventional life insurance—and if you do qualify, you’ll probably have to pay phenomenally expensive premiums. If you find yourself in this predicament, survivorship life insurance may be the ideal solution.

An affordable alternative

Survivorship life insurance is also known as a “second-to-die” policy. These policies are typically less expensive than conventional life insurance because they insure the lives of two people as opposed to one. A survivorship life policy pays out the death benefit only after both of the insureds have died.

The premiums on survivorship insurance are lower simply because these policies are considered to be lower risk for the insurance company. After all, the risk of two people dying within a specified period of time is much lower than the risk of one person dying—which means the insurance company is less likely to have to pay the benefit.

Like regular life insurance, a survivorship policy can help pay off estate taxes if both of the policy holders die. However, even if your estate is not subject to taxes, the benefit from a survivorship policy can help pay final expenses and probate costs with enough left over to provide income to survivors or make a charitable donation.

Additionally, if you purchase a survivorship policy in an irrevocable life insurance trust, the proceeds will not be included in the taxable estate—which means the benefit will pass to your beneficiaries tax-free.

Is survivorship life right for you?

Like any other insurance policy, whether or not you’ll qualify for survivorship life all comes down to your age and health as well as the type and amount of insurance you want to purchase. (These factors will also determine how much you’ll have to pay for the policy.)

Before you dive into a survivorship life insurance application, you should first confirm that you are in fact insurable. Additionally, because survivorship policies often involve trusts, there may be some complicated tax rules and regulations attached to the policy. Consult with Brian Gruss to determine if a survivorship policy is the best option for you.

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A Second Glance At Whole Life

By now, most consumers understand the critical importance of life insurance—especially those who have loved ones depending on their income. Life insurance offers financial protection for your dependents should anything happen to you. Without the right coverage, your family may struggle to pay the bills and make ends meet.

However, there is a common misconception about life insurance: most people assume that term life insurance is much more affordable than whole life insurance. While this may be the case for those who are young and healthy, term insurance can become exorbitantly expensive for older individuals who may no longer be the picture of health.

Term vs. Whole

As you probably know, term life insurance covers you for a specific amount of time—anywhere from one to 30 years. These policies are less expensive because they are designed solely for protection. Many people choose term insurance because they figure the need for life insurance will decrease as they get older. Term insurance is also a useful option for those who want to protect their children until they are able to support themselves.

On the other hand, whole life insurance is permanent—it offers protection for your entire life. This insurance is ideal for individuals who still have someone depending on their income, whether it’s a spouse, grandchild or a special needs son or daughter. It’s also a good option for individuals who want to ensure there’s enough money to pay off their debts or provide a tax-advantaged inheritance for their heirs after they die.

Making the switch

Let’s say you fall into that second category—you think you may have a need for life insurance protection for the rest of your life. However, your term policy is about to expire. What should you do?

You may consider renewing your current term policy. However, your premiums will most likely skyrocket now that you’re older. Alternatively, you could convert your term policy to whole life. This will ensure that you are covered for the rest of your lifetime—which means your dependents will be protected when you die, whether that happens one or 20 years from now.

Whole-some benefits

One advantage to whole life insurance is that the premiums generally remain constant over one’s lifetime.

Another benefit to whole life is that you can borrow from the accumulated cash value of your policy. However, it’s important to realize that like any loan, interest will accrue on the money you borrow from your policy. If you do not pay back the loan during your lifetime, this amount will be deducted from the death benefit before it’s paid out to your heirs.

The loan feature is particularly beneficial to older policyholders who have built up a significant cash value. After all, as we grow older, we often run into some financial “surprises”—from medical emergencies to dwindling retirement income. The cash value from a whole life policy could help you deal with these unexpected events. For example, you could borrow from your whole life policy’s cash value to supplement your income, pay off your mortgage or fund long-term care expenses. You could even use the money to help pay for a grandchild’s college education.

Are you a good candidate?

As with any type of insurance, whether or not you qualify for whole life and the price you’ll pay depends on your age, health and the specific type and amount of insurance you plan to purchase. Meet with Brian Gruss to determine whether or not whole life insurance is right for you. He can assess your unique situation and find the best policy to meet your needs.

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