Life insurance is generally the most efficient, cost-effective, and overall best way to leave an inheritance for your loved ones. As such, it should be an integral part of your financial and estate plan.
At its core, life insurance is simply a financial plan whereby people pay a designated premium amount in exchange for the payment of a much larger amount to a designated beneficiary upon their death. By planning a specific inheritance amount before your death you can offer a significantly larger sum of money to your beneficiaries at your death than otherwise possible. Failure to consider using life insurance as part of the inheritance and financial legacy you will leave is a missed opportunity.
Benefits of Using Life Insurance to Leave an Inheritance
Stocks, real estate, and other investments are not guaranteed and fluctuate in value over time. If a market collapses shortly before your death, your beneficiaries will receive much less than you intended. Life insurance offers a guaranteed inheritance amount that assures you and your loved ones that they will receive no less than the amount that you initially planned for. Other benefits include:
- Pay pennies on the dollar for the amount you leave: Life insurance premiums are typically very small compared to the amount the beneficiaries will receive upon your death.
- Tax-free: Life insurance payouts go to your beneficiaries income tax-free. This means they get to keep what you give them without the government taking a cut of it first.
- No probate process: The ability to pass on an inheritance without going through probate makes the inheritance process significantly faster and less expensive. It will also keep the details of the inheritance private, unlike the probate process which is part of the public record.
- Spend ALL of your retirement savings: You can spend the rest of your money without worrying about saving any for your kids. Life insurance will take good care of their financial wants and needs after your death.
Types of Life Insurance That Can Be Used To Leave an Inheritance
Not all policies are the same, and the one you choose will impact the payout to your beneficiaries. The most common types of life insurance policies to leave an inheritance are:
- Guaranteed Universal Life (GUL): This is a permanent life insurance policy where your policy never expires as long as you pay premiums (like a lifetime term policy). There is typically little to no cash value accumulation, but the premiums are generally lower than “cash value” life insurance policies as the only intended purpose of this policy is to guarantee the payment of a death benefit.
- Whole Life: This type of life insurance policy guarantees a set premium amount for a specified number of years. This could be anywhere from a one-time payment to a set payment for life. A whole life insurance policy can increase both in its cash value and death benefit based on interest and/or dividend payments. Its guarantees make it a popular choice for people looking to leave an inheritance to their loved ones.
- Index Universal Life (IUL): Like a whole life insurance policy, this policy can also grow in cash value and total death benefit. However, unlike a traditional whole life insurance policy, you can connect the cash value growth to a market index, where it can earn returns based on market returns.
Plan Your Children’s Inheritance Today with CEG Life
Life insurance allows you to plan and guarantee a specific inheritance amount according to your family’s financial goals and needs. When planning for your children’s (or grandchildren’s) inheritance it is best to work with a qualified life insurance advisor. Here at CEG Life, we can help you determine the best insurance plan to maximize the inheritance amount your beneficiaries will receive at the lowest cost.
Contact us today to learn more.