How to Transfer Wealth Using Single Premium Life Insurance

If you have money set aside in a fixed annuity or a CD with the sole purpose of passing it on to your loved ones, you may be missing a huge opportunity to increase your principal. Have you thought about how the money you leave will be paid at your death? Taxes can eat up a large portion and if not prepared for properly, your loved ones could get slowed down by a lengthy and expensive probate process. In general, life insurance passes on income tax-free and in many cases money from life insurance will pass on outside of probate. Many people overlook life insurance as an option and get caught up in which annuity will grow at the highest interest rate.

I’m not saying that you shouldn’t invest in an annuity or a CD, what I’m saying is you shouldn’t put all of your eggs in one basket. Let’s say for example that you are a 65 year old female that doesn’t smoke. You have $100,000 that you want to pass on to your loved ones but are concerned about giving up control of your money should your retirement needs ever change. There are insurance policies out there that will allow you to make one premium payment and have a guaranteed death benefit for life. So you take half of your $100,000 and put it into a single premium policy and the other half and invest it in a fixed index annuity. In many cases if you’re in good health you can get a $100,000 guaranteed death benefit from the $50,000 single premium life insurance payment. Now you still have $100,000 to pass on to loved ones and $50,000 to create a lifetime income from an annuity.

There is not one single answer for everyone. Your situation could be very different than the one I’ve used but don’t forget about life insurance. Many of the single premium life insurance options have very simple underwriting and will still build up a cash value. When trying to figure out what is the best option for your situation, make sure you use an advisor who can offer you these choices and is sincerely concerned with all of your needs. You’ve worked hard for you money. Maximize your legacy and pass it on income tax-free!