Tri County Elder Law

Insurance Dedicated Funds

With insurance dedicated funds, wealthy people can invest money that will eventually go to their heirs, while avoiding estate and capital gains taxes. Life insurance has been a popular estate planning tool for a long time. It is normally used as a relatively simple way to even out inheritances between heirs or to provide needed cash for family members, after the policy holder passes away. In most cases, life insurance is a very simple process to understand. A policy is purchased, premiums paid and upon the death of the policy holder, cash is distributed to the beneficiary. To sweeten the deal, because life insurance is a death benefit, the beneficiary does not have to pay income taxes on it when paid out as a lump sum. Wall Street has a way to make this even more beneficial for wealthy people and it is becoming increasingly popular according to Barron's in "New-ish Tax Planning Instrument Gathering Billions." An insurance dedicated fund is a complicated investment tool that gets treated for tax purposes in the same way as life insurance. It allows people to invest money that is then managed by hedge funds, without paying any capital gains tax on the investment. When the investor passes away, the accumulated funds in the account are distributed to beneficiaries and have the same tax benefits as life insurance. Insurance dedicated funds are not new, but they have recently started becoming more popular. Reference: Barron's (June 28, 2017) "New-ish Tax Planning Instrument Gathering Billions."

Heirs May Need Cash to Hold Them Over

Cash for expenses should be included in an estate plan. Some advice on how to plan for your family to access cash while your estate is being settled comes from South Africa by way of Personal Finance in "Will your family avoid a cash-flow crisis on your death?" The advice is applicable in the U.S. Getting an estate through probate can take a lot of time, depending on the size of the estate and the probate laws in the state. Your family will not receive the cash from your will for a while, in most circumstances. If you do anticipate that your family will need cash after you pass away, the most effective way to provide it is normally to take out a life insurance policy. These policies pay out almost immediately upon learning of death. Another idea is to open a joint bank account with a trusted family member and to put some money in the account that will only be used in the event of your passing. Reference: Personal Finance (April 22, 2017) "Will your family avoid a cash-flow crisis on your death?"