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
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