Selling Life Insurance? One tip to save your clients thousands!John Sanders
Selling Life Insurance? One tip to save your clients thousands!
A top life insurance tip to save some beneficiaries taxes and ensures their policy pays out with the minimum of fuss. It is simple, have your clients Life Insurance policy paid to named beneficiaries. This may sound obvious, but it is easy to understand, and it is so easy to organize.
Named beneficiaries ensures that in the event of a death claim, the policy will pay directly to the beneficiaries named on the policy when the client buys the policy. If the client does not do this, the policy will payout to legal estate and this inevitably means that the money stays in the estates hands for some time.
Yes, that implies legal delays and, of course, probate taxes may take a cut!
Then, if the value of the taxable estate exceeds state and federal minimums, beneficiaries may have to pay Inheritance Tax. This represents more than needed. So, if beneficiaries must pay Inheritance Tax and the proceeds of the life policy go to the estate, the taxes take the cash, most likely from the death benefit!
But it is so easy to avoid all this problem.
Simply instruct your client to name beneficiaries. Then the life insurance company pays out immediately, directly, and totally tax-free, to the persons you have named on your policy. This advice remains sound even if the policy is designed to pay off your mortgage. Rather than your estate using the insurance payout to pay off your mortgage, the policy names a partner and then he or she can use that money to pay off the mortgage. The benefit? Well if your taxable estate exceeds the Inheritance tax threshold the mortgage is effectively paid off tax-free.