It is very interesting how often plumbers have leaky pipes and the insurance agent has no life insurance. People get busy in their professional lives and keep putting off what they can do for themselves today, in order to do for others they serve. This phenomenon combined with the fact that people are ultimately private and do not want any one person or entity knowing everything about them, can complicate many situations and make things more difficult when the unexpected occurs. When we lose a loved one, a myriad of emotions are projected. While we know, OUR kids are angels and would never argue… And that we want our spouses to be left in the best situation, stuff happens. Unfortunately, greed often rears its head far too often and families are divided when they should be coming together. Ultimately, Uncle Sam may become our biggest beneficiary because of such familial divisions. While most of us know we are better served to tax the seed rather than the harvest, many times we do not plan in such a manner in regards to our own ultimate certainty. As we have all heard, there are only two certainties in life, “Death and Taxes,” right?
The issues we do not think about are often simple mistakes that cost our families dearly when we are gone. In my practice I have worked hand in hand with an estate planning attorney for years to try and protect my clients. One simple rule everyone should understand, “Never put the estate as the beneficiary for qualified monies!” We all know someone we want to leave our assets to when we pass, even if it’s a charity. Unsecured debt to creditors can only attach to your qualified IRA’s if you leave it to your estate; make the right decision and allow your hard-earned savings to benefit those who matter to you most! In addition, second marriages are one of my favorites. Spouses often want to leave their retirement to their respective children rather than the new spouse. This is a great move for Uncle Sam because the taxes are due within five years if left to a non-spouse beneficiary in your family. By using a stretch provision, or a Beneficiary IRA, it may be withdrawn over the named beneficiary’s lifetime using the life expectancy mortality tables penalty free. IRA’s and other qualified dollars left to a spouse are tax free on the transfer and only taxed as ordinary income when realized, or received.
Many times we see investors who do not need the money contained in their portfolio while they are living, yet when asked, “What is the purpose for those dollars?” they respond with words like “emergency fund” or “to take care of the kids.” If this is you, then you really should consider Life Insurance as an asset class, just as if you would real estate or an investment portfolio. Life Insurance is tax free to your beneficiaries as long as your estate is under approximately $5.2M per person and is typically overlooked from an asset class perspective. The money grows tax-deferred and is tax-free when you pass away.
People think, “I have money, I don’t need insurance,” and that is like saying, “Why invest? I already have enough.” It is all about leveraging your dollars in the most tax efficient way while morally, ethically and legally disinheriting the IRS. Come see my team or talk with a professional today. While we do not give tax advice, we provide strategies for better use of the dollars you currently have or are trying to create!
Alan Becker is an insurance professional with Retirement Solutions Group, Inc. and is insurance-licensed in Kansas and Missouri. Retirement Solutions Group assists retirees and pre-retirees in the creation of retirement strategies that include the use of insurance products. Retirement Solutions Group is not affiliated with nor endorsed by any government program, including the Social Security Administration, the Centers for Medicare and Medicaid, the Health Care Authority or the Department of Housing and Urban Development.