You’ve worked hard your entire life to take care of your loved ones. Smart investments, hard work, and drive have gotten you to a financially secure place.
Financial security is fickle, however. Once you are gone, your family will be left in a vulnerable state unless you make the smartest investment of all: getting the proper life insurance policy.
Life insurance is complicated and ever changing.
Life insurance for high net worth individuals is a beast unto itself.
If picking the best policy for your family leaves you feeling a little overwhelmed, don’t worry. We can help you out. Here are some of the best tips and options for your situation, presented as possible problems and solutions for you.
Life Insurance for High Net Worth Individuals with Businesses
Knowing how much is in your bank account is important, but it’s not enough to make proper life insurance decisions.
You need to take into account all of your assets. If you own a business, what are you going to do with it? Will you pass it on to a beneficiary or your children?
Possible Solution: Buy-Sell policy
If this describes your situation, then you will need to consider a buy-sell policy. This is when the business buys life insurance for high net worth policies for each of the owners. Normally the business pays the premiums and receives the payout.
Another influencing factor is how much of you net worth is “liquid” and not tied up to an estate or other property. You should talk to a professional to see how much of an estate tax you will have to pay.
This tax is costly, and could run as high as 40%! Your family might be forced to sell off some property in order to pay this. There is also the possibility that the state you live in may take a piece of your wealth as well.
Possible Solution: Create a Trust
With the help of tax and life insurance professionals, you can create a trust that will separate your life insurance from your other assets, meaning that your family will not have to pay taxes on it.
These taxes have crippled families in the past, as they must be paid within nine months of your passing in cash only. If you hold numerous non-liquid assets, your family will probably have to have a “fire sale” in order to cover this cost.
For this reason, keeping with the old rule of 10 times your income for life insurance might not be the best bet for you.
If you create a trust, you can set up your life insurance to cover your estate tax AND give your family financial security.
Old Life Insurance Prior to Wealth
This is a problem for a lot of clients. Someone signs up for a cash value life insurance plan before they earned their high net worth status, and now they assume that they are stuck with a policy that doesn’t add value to their wealth.
This puts your families long term financial stability in jeopardy. You have to consider life insurance for high net worth individuals as another asset that you own. It is not separate from the others, it enhances them.
So how do you get out of a policy that isn’t up to par with your other assets?
Possible Solution: 1035 Exchange
If you cash out a universal life or whole life insurance policy, it could be taxed as taxable income.
This can be fixed with a 1035 exchange, which will allow you to get rid of the old policy that doesn’t work for you in exchange for life insurance for high net worth individuals like yourself.
If you still have a policy from when you were in your early twenties, make sure that you talk to a professional today, as you might be cheating yourself.
Protecting Your Family For Generations
If you have grandchildren, you want them to be able to enjoy the fruits of your labors as well. If your life insurance pays out in one lump some, however, this might not be possible.
If your family is used to you being the provider, they might not know how to manage a lump sum and help it continue to grow for future generations. How do you make sure that there are plenty of assets for your grandkids?
Possible Solution: Legacy Payments
Companies that offer life insurance for high net worth customers have already thought of a plan for this.
Legacy payments work differently than lump sum payouts. You can determine that instead of your beneficiary receiving a payout all at once, the payout is spread out over time.
You can set this payout to be every month or every year, and can even select the date that you want it to occur. This can happen on someone’s birthday or your wedding anniversary.
A great benefit of this is that it could possibly lower the amount of taxes that your family will have to pay on the payout. There are a number of great options with legacy payments in life insurance for high net worth policies.
High Net Worth Individuals Need Proper Life Insurance Coverage
This is a problem that is still prevalent, no matter how much financial education someone has.
Some people will think that they don’t need life insurance for high net worth individuals because they think they have enough money to cover their families in the future.
There are two problems with this thought. First, life insurance for high-end net worth is more than protecting assets after your death. It is an asset in and of itself.
Second, all you have to do is look around and you will see plenty of families whose wealth was destroyed because of a lack of life insurance. You might think that you and your family is different, but guess what?
Their family thought the same thing.
We are here to help you if you need to discover the amazing benefits of life insurance. Unlike many other companies, we do not attempt to offer everything under the sun.
We believe that our focus on life insurance only enables us to provide you with the best service. We have insurance options for everyone, even life insurance for high net worth customers.