Maximizing Inheritances with Capital Transfers

Below you will find a sample case study on how capital transfers can help you maximize your beneficiaries inheritance:

Example 1
Eduardo, age 65, rated standard, has a $100,000 Certificate of Deposit that he does not need to provide income. If he cashes it in and uses the proceeds to purchase a single-premium life insurance policy with a lifetime secondary guarantee death benefit, the policy could have a death benefit of about $240,000.

By using the capital transfer technique, Eduardo has the certainty of knowing how much his beneficiaries will receive and he has eliminated current taxation associated with the CD and any concerns about future interest rate changes. Of course, if Eduardo is in good health, a higher death benefit may be possible.

Example 2
Jane, age 71, in good health, is living comfortably off her late husband’s pension and some other assets. She has an IRA of her own with a current balance of $150,000 and she will have to start taking required minimum distributions next year. Jane does not expect to need the assets and wants to transfer them to her daughter, Mary. Jane realizes that the amount that Mary will receive will be substantially less than the account balance because of the income tax liability.

While Jane is willing to cash in the IRA this year and pay the income taxes, she agrees that it would be better to liquidate the account over 10 years, taking a $16,000 distribution each year. Assuming that she is in a 25% tax bracket, she will have $12,000 a year to contribute to the life insurance policy. She uses this amount to purchase a no-lapse guarantee universal life policy with a death benefit of $235,000.

Once again, Jane has provided a guaranteed amount to her beneficiaries and they will benefit from having income tax-free funds without having to deal with the post-death IRA distribution rules.

For more information on capital transfers, Contact Lloyd.



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