The 6 forgotten tax breaks of the life insurance middle class
In addition, there are no regulatory restrictions on how cash withdrawn from a life insurance policy should be used by the owner. This creates significant flexibility to use the money to finance a variety of needs, whether they are health or personal needs, such as building a new roof.
5. Additional source of tax-free retirement income
Policyholders can withdraw or borrow against the value of their permanent life insurance contracts for any need, such as supplementing their retirement income. If this benefit is used, the policyholder should clearly understand that using the cash value of a life insurance policy decreases the remaining cash value as well as the death benefit.
6. A tax-free way to leave an inheritance
Life insurance can be used to create a tax-free inheritance for beneficiaries by using the tax-free death benefit. For very large deaths, there is the possibility of triggering inheritance tax, which must be planned. Bequests can be created for family members, charities, religious organizations, and educational institutions. This can allow individuals to benefit from many entities using the leverage created by the death benefit of life insurance.
The bottom line is this: When you read about tax breaks for the middle class, the benefits of life insurance are rarely mentioned.
Life insurance offers important tax benefits that give families protection, the ability to accumulate money and leave a legacy for loved ones. We need to beat the drum harder to promote these intrinsic benefits.
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Harry N. Stout was President of Fidelity & Guaranty Life, Deputy Managing Director of Old Mutual Financial Network and Managing Director of Insurance Insight Group. He is also the author of FinancialVerse Personal Finance Books and a new book, Life Insurance Today – A Protection Tool for Your Future.