Asset Protection: Life Insurance Part 1

Many high-net-worth individuals may find themselves entirely self-insured, with their assets kept in banks and multiple investments. However, economic issues exist, and they may result in a financial crisis for the investor/depositor. The last thing anyone wants is to run out of money, lose their assets and be incapable of securing their family’s legacy. With some forethought and consideration of your future financial plans, you can make sure not to reach such a disastrous state by obtaining a Life Insurance Policy.

Life Insurance can be essential for a few good reasons. One is for tax benefits. For instance, policy owner spends $100,000 to buy a $5 million life insurance policy, the initial premium payment of $100,000 may or may not be taxed on a different scale. Still, the $5 million of benefit money that the beneficiaries will receive will not be subject to taxes. This ensures the protection of the family’s financial future when the policy owner unexpectedly passes away.

For Business Owners, a Buy and Sell Agreement will make sense. This agreement can be funded and secured by a life insurance policy. The business owner will name their business partners or co-owners as beneficiaries. Should the policyholder die, the policy proceeds will pay out the remaining partners to purchase the deceased person’s business share. Life Insurance Policies can provide protection to the business and remaining partners. It can also be a smart way to resolve complex situations with the surviving family members. The surviving family members may demand the share of the business’ assets but may not be interested in incorporating themselves into running the business. This is when the business partners can use the payout to purchase the person’s share from the surviving family members. This is beneficial for both parties, the surviving family members acquire the money, and the remaining business partners can have complete control of the company without the family’s participation.

Additionally, the business can benefit from a Key Person Insurance Policy. A company purchases a life insurance policy on the founder, owner, key employee, or any person considered an integral part of the business. In the event of the person’s death, the company gets the death benefit. The money can then be utilized for the expenses such as recruiting and training a replacement of the deceased. Key Person Insurance provides options to the company against an extent of risk. It may protect profits by redressing income from lost sales due to a setback in a project involving the key person. If the company doesn’t see the option to recommence the business, they may opt to use the money to settle debts, disseminate money to investors and compensate the employees.

Purchasing a Life Insurance Policy establishes an intelligent money habit for not just the high net-worth but all individuals. It is a potential tax savings mechanism or investment form that will surely support family expenditures and future financial plans. Indeed, it serves as an asset protection such as the tax-free death benefit, which is a huge advantage to everyone.