What are the Tax Benefits of Permanent Life Insurance Policy?
Can you cut your tax bill by using your life insurance policy? You definitely can. Ideally, proper tax planning will reduce your tax rates during your lifetime, and will continue to do so after you die. With permanent life insurance, you can actually cover both bases - you can build up tax-deferred growth within your policy, and you can transfer assets to your beneficiaries. Permanent life insurance tax benefits thus can be measured by its various advantages.
Usually, when you think about life insurance, you're considering how it's going to benefit the people that you leave behind. It’s natural to consider about life insurance tax benefits before buying it. But life insurance can do so much more for you - it can make sure that your child goes to college, it can provide your spouse with a retirement fund, and it can make sure that your survivors are able to live the kind of lifestyle that you envisioned for them. All these benefits are contained by permanent life insurance.
If you're considering life insurance as an investment, think about this - it doesn't matter how much money you leave in a death benefit, your survivors do not spend one single cent in taxes on that benefit. Could there be a better investment? Think about life insurance tax benefits before you buy it!
If your inheritors get an IRA, or a deferred annuity, or a retirement plan, they can get walloped to the tune of 35% in taxes. In life insurance, there’s nothing like that. A permanent life insurance can be a boon its loyal customers.
How Do You Benefit?
With your life insurance plan, there's money growing that's tax-free. This implies that life insurance tax benefits You can use it to supplement your income, pay for medical care, renovate your house, or do just about anything else that requires a cash outlay. And you'll pay no tax.
If you're collecting social security, you could have to pay up to 85 per cent on those benefits. With life insurance, you pay no taxes. Your policy simply grows and grows, and you lose nothing to the IRS.
Irrevocable Life Insurance Trusts
If you have a net worth of over four million dollars, along with your spouse, you might want to consider an irrevocable life insurance trust. The ILT owns the policy, and when you die, you don't have to worry about your inheritors paying income taxes on your death benefits.
Give It Away
If your means are more modest, but you'd like to have your money working for your heirs, then you might want to consider just giving them money now. You'll reduce the value of your taxable estate by the amount of the gift, and your survivors won't have to pay taxes on the cash value of your policy.
If you're worried about estate taxes, then buying permanent life insurance can be the solution. Simply stated, you can save a ton of money for your inheritors.
There are so many ways that you can save money on your life insurance with tax benefits. You'll benefit, and so will your inheritors.