There are more than a few ways to build wealth for your family’s future. One often overlooked and untapped method is life insurance. Talking about life insurance is typically an awkward conversation that requires you to face the uncomfortable truth that someday you or a loved one will pass away. It’s worth investing a bit of time in discussing it with your loved ones. So, here are a few ways to use life insurance as a wealth building tool.
Cash Value Accumulation
Life insurance policies, such as Farm Bureau Insurance’s whole life policy, often come with a cash value component. As you pay your premiums, a portion of them goes towards building a cash value within your policy. Over time, this cash value can grow on a tax-deferred basis, and this allows you to accumulate wealth. You can access this cash value through things like policy loans or withdrawals, which can be used for a variety of purposes, such as supplementing retirement income or funding educational expenses.
The growth of cash value within a permanent life insurance policy is tax-deferred, and that means you won’t owe taxes on the accumulated cash value until you withdraw it. Additionally, the death benefit paid out to your beneficiaries is typically income tax-free.
The death benefit from a life insurance policy can provide liquidity to your estate, ensuring that your loved ones have the necessary funds to pay estate taxes, settle debts, or cover other financial obligations. By incorporating life insurance into your estate plan, you can preserve and transfer wealth to future generations efficiently.
Business Succession Planning
This tip is only applicable if you own a business, as life insurance can be a useful tool for business succession planning. It can provide funds to facilitate a smooth transition of ownership in the event of your death. The proceeds from a life insurance policy can be used to buy out a deceased partner’s share, ensuring the continuity of the business and protecting its value.
If you were to name a charitable organization as the beneficiary of your life insurance policy, you can create a substantial donation that will be made upon your death. This approach allows you to build wealth for philanthropic purposes while simultaneously reaping the tax benefits during your lifetime.
You never know what’s going to happen in life. That’s why today is always a great time to think about your loved ones and where they’d be without you. Take a step toward ensuring their financial security by speaking with Colorado Farm Bureau Life Insurance about our life insurance policies. Use our Agent Finder to locate an agent near to get started.