Covenant CPA

  • About CCG
  • Our Team
    • Raiford “Ray” Dyer Jr.
    • Meredith Baxter
    • Larry B Frost
    • Jamie Lambert
    • Susan Harper
    • Khialee Boyles
    • Cindy Hayes
  • Services
    • Accounting & Assurance
    • Tax Advisory
    • Litigation Support
  • Press
    • Business Management
    • College Saving & Spending
    • Estate Planning
    • Fraud Prevention
    • Gift Tax
    • Household
    • Individual
    • Investing
    • Owning a Small Business
    • Retirement
    • Tax Returns
    • Vehicle
  • Events
  • Contact CCG
(205) 345-9898

Life insurance can be a powerful estate planning tool for nontaxable estates

Life insurance can be a powerful estate planning tool for nontaxable estates

by Justine O'Sullivan / Monday, 01 April 2019 / Published in Estate Planning

For years, life insurance has played a critical role in estate planning, providing a source of liquidity to pay estate taxes and other expenses. Today, the gift and estate tax exemption has climbed to $11.4 million, so estate taxes are no longer a concern for the vast majority of families. But even for nontaxable estates, life insurance continues to offer estate planning benefits.

Replacing income and wealth

Life insurance can protect your family by replacing your lost income. It can also be used to replace wealth in a variety of contexts. For example, suppose you own highly appreciated real estate or other assets and wish to dispose of them without generating current capital gains tax liability. One option is to contribute the assets to a charitable remainder trust (CRT).

As a tax-exempt entity, the CRT can sell the assets and reinvest the proceeds without triggering capital gains tax. In addition, you and your spouse will enjoy an income stream and charitable income tax deductions. Typically, distributions you receive from the CRT are treated as a combination of ordinary taxable income, capital gains, tax-exempt income and tax-free return of principal.

After you and your spouse die, the remaining trust assets pass to charity. This will reduce the amount of wealth available to your children or other heirs. But you can use life insurance (a cost-effective second-to-die policy, for example) to replace that lost wealth.

You can also use life insurance to replace wealth that’s lost to long term care (LTC) expenses, such as nursing home costs, for you or your spouse. Although LTC insurance is available, it can be expensive, especially if you’re already beyond retirement age. For many people, a better option is to use personal savings and investments to fund their LTC needs and to purchase life insurance to replace the money that’s spent on such care. One advantage of this approach is that, if neither you nor your spouse needs LTC, your heirs will enjoy a windfall.

Finding the right policy

These are just a few examples of the many benefits provided by life insurance. We can help determine which type of life insurance policy is right for your situation. 205-345-9898 or info@covenantcpa.com.

© 2019 CovenantCPA

Tagged under: estate planning, insurance, life insurance

Recent Posts

  • Work Opportunity Tax Credit extended through 2025

    Are you a business owner thinking about hiring?...
  • Deepfakes: The newest frontier in fraud

    Fraud perpetrators are constantly altering thei...
  • Take control of your charitable donations using restrictions

    Did you know that you can put restrictions on c...
  • Should your business add Roth contributions to its 401(k)?

    If your business sponsors a 401(k) plan, you mi...
  • Didn’t contribute to an IRA last year? There still may be time

    If you’re getting ready to file your 2020 tax r...

ABOUT CCG

Covenant Consulting Group LLC (CCG) was founded in 2007 when our partners decided that clients deserved a holistic approach to better service and attention. CCG takes the best parts of a consulting firm and combines them with the best parts of a traditional CPA firm.

CONTACT CCG

(205) 345-9898

info@covenantcpa.com

TEAM NEAR YOU

Tuscaloosa: (205) 345-9898
Northport: (205) 345-9898
Birmingham: (205) 757-8308
Atlanta, GA: (404) 348-0593
Starkville, MS: (662) 268-6128

  • About
  • Press
  • Accounting & Assurance
  • Tax Advisory
  • Litigation Support

Copyright © 2018 Covenant CPA LLC. All rights reserved.

Webite by J. Ferragut

TOP