I’m Un-Insurable, What options do I have to leave tax-free money to my beneficiaries?

 In Ozarks Live, Financial Planning, Insurance Advice, Tips

I’m Un-Insurable, What options do I have to leave tax-free money to my beneficiaries?

Life Insurance, Do you need it?  If properly structured, life insurance offers tax-free proceeds to support your dependents upon your death.   If you get the news that you are unable to purchase a Life Insurance policy there are other strategies to consider to help provide a tax-free legacy to your beneficiaries. For example, an IRA conversion moves either all or part of a Traditional IRA into a Roth IRA.

Your converted amount will be included as ordinary income on your taxes, but will provide the potential for tax-free distributions to your beneficiaries as long as you have owned the account for more than five years.  The money has to be there no less than five years to get past the requirement and then the heirs/beneficiaries will receive it tax-free.  Since your before-tax conversion will be included in your gross income it might be wise to consider contributing smaller portions to the account periodically over the next five to ten years. Consider spreading out your conversions in a smaller amount so you can absorb the tax a little bit better while you’re also providing for your retirement income. This way there is a combination of things going on, but that’s an alternative if you are un-insurable and want to leave a tax-free benefit to your beneficiaries.  Consider possibly converting part of your IRA to a Roth along the way.

The big benefit of life insurance when you’re older is that your beneficiaries are going to get money, and better yet, they are going to get that money income tax-free. A lot of people buy life insurance at an older age to help create tax-free estates for their beneficiaries, which in turn also allows them to spend all of their money, and still leave a legacy for the kids by paying a life insurance premium.  The main purpose of life insurance is for the death benefit, but life insurance offers other benefits that are important to consider.  For example; to create an estate, leave a tax-free benefit, the possibility of living benefits to assist with the costs of long-term care and things along those lines.

When it comes to finding the policy that is right for you, think through what you are trying to accomplish and what you want to leave as your legacy to your family. Having a policy set up also grants you the privilege of spending all of your money (if you want to) as you please without worrying and feeling bad that you’re not leaving the kids anything.

There is a variety of uses and benefits for life insurance. It’s a good place to build some cash value, and if something were to happen to you, a smaller amount of money through the life insurance premium buys a larger benefit, known as the face amount or the death benefit.

As always, if you have any financial questions or if you would like more information on this topic, send us a message or give our office a call anytime at 417-882-1800. Make sure to tune into Bruce’s show next week or catch up on past episodes on our blog or Youtube channel. 

Additionally, if you would like to schedule an appointment with our advisor, Brue Porter, online please click this link to view his current schedule of availability.


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1- https://www.bankrate.com/investing/ira/roth-ira-5-year-rule-the-tax-free-earnings-clock-starts-ticking-at-different-times/

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives.  This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice.  All investments are subject to risk including the potential loss of principal.  No investment strategy can guarantee a profit or protect against loss in periods of declining values.  Life insurance product guarantees rely on the financial strength and claims-paying ability of the issuing insurer.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.   

We are not permitted to offer, and no statement contained herein shall constitute, tax or legal advice.  Individuals are encouraged to consult with a qualified professional before making any decisions about their personal situation.  Our firm is not affiliated with the U. S. government or any governmental agency.  Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM).  AEWM and The Resource Center are not affiliated companies.  AW04182377

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