Life and Health Insurance

Universal Life insurance and estate protection: a winning combination!

Do you know that it can be beneficial to invest in a Universal Life policy?

Universal Life policy is an excellent financial planning tool and an effective tax shelter for investments purposes. A comparison between savings in a tax exposed environment and investments in a tax-exempt Universal Life policy shows in a concrete way the differences between the two investment options.

Here are two types of estate protection:

• Individual estate protection

The client purchases on his life a tax-exempt Universal Life policy with an increasing death benefit. The client chooses to invest higher amounts than the minimum premium needed to keep the policy in force. Over time, the cash value increases substantially since it accumulates on a tax-deferred basis. Upon the client’s death, the total death benefit (including the fund value of the policy) will be paid tax-free to the beneficiary of the policy.

• Corporate estate protection

A corporation purchases a tax-exempt Universal Life policy with an increasing death benefit. The corporation is both the owner and the beneficiary of the policy, and the shareholder/key person is the insured. The corporation deposits funds into the policy in excess of what is needed to keep the policy in force while remaining exempt. Upon the insured’s death (shareholder/key person), the total death benefit (including the fund value of the policy) will be paid tax-free to the beneficiary of the policy (the corporation).

The life insurance death benefit paid to the corporation, minus the adjusted cost basis of the policy, will be credited to the capital dividend account of the corporation. Tax-free dividends (from the capital dividend account) can then be paid to the shareholders of the corporation.

You can access the illustrations of estate protection sales concepts in our illustration software.

 

Speak about it to your clients today and do not hesitate to contact your SSQ representative. Our team is always available to help you!