Today’s topic focuses on sudden wealth and using life insurance. To lend his expertise on today’s topic is Harvey Strait. Harvey is a regional Vice President for Pacific Life based in Austin, Texas. Pacific Life provides advanced insurance planning for corporations, executives and high net worth families and is not affiliated with LPL Financial or Quartz Financial.
Well I’m sure your first question might be, “if I’ve just come into more wealth than ever before, why would I need life insurance?
Many people automatically assume that you purchase life insurance solely to provide a death benefit to your beneficiaries. While the primary reason for purchasing life insurance is for death benefit protection, life insurance can offer other benefits for sudden wealth recipients. For the sake of brevity, I’ll talk about one of those.
Let’s talk about the Jones family who was lucky enough to win 20 million dollars in the lottery.
You have most likely heard of the Estate Tax (or Death Tax). This is a tax levied on everything you own as it passes from one generation to the next. Congress set this tax currently at 40%, above a certain threshold. If Mr. and Mrs. Jones passed away the day after collecting their winnings, the government would want to levy that tax. Less the current exemption the Jones family would owe approximately $4 Million dollars to the government! A life insurance policy could have been purchased to help replace the loss to the inheritable estate from the payment of inheritance and other taxes and other costs arising at death. You might think well Mr. and Mrs. Jones could have just had their estate pay the tax, sure but at the end of the day, would you rather your kids, grandkids and favorite charities receive that money or the government? The choice is yours.
- Harvey Strait, regional Vice President for Pacific Life
This material is not intended to be used, nor can it be used by any taxpayer, for the purpose of avoiding U.S. federal, state or local tax penalties. This material is written to support the promotion or marketing of the transaction(s) or matter(s) addressed by this material. Pacific Life, its distributors and their respective representatives do not provide tax, accounting or legal advice. Any taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.
Pacific Life refers to Pacific Life Insurance Company and its affiliates, including Pacific Life & Annuity Company. Insurance products are issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company. Product availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products it issues. Insurance products and their guarantees, including optional benefits and any crediting rates, are backed by the financial strength and claims‐paying ability of the issuing insurance company. Look to the strength of the life insurance company with regard to such guarantees as these guarantees are not backed by the broker‐dealer, insurance agency or their affiliates from which products are purchased. Neither these entities nor their representatives make any representation or assurance regarding the claims‐paying ability of the life insurance company. Pacific Life’s home office is located Newport Beach, CA.
1-05056173