Nearly everyone has some type of life insurance, perhaps in the form of group protection provided by your employer or in the form of an individual policy that you purchased from a professional life insurance agent or financial planner. After considering the benefits and advantages of a gift of life insurance, you may decide that you can gift an existing life insurance policy that you no longer need.
While everyone's circumstances are different, the following examples represent situations in which a gift of an existing life insurance policy may be appropriate.
1. When your children were younger, you may have purchased a life insurance policy to insure their education, or for some other purpose. Now, years later, your children are grown and out on their own, and you have a life insurance policy that was purchased to meet a need that no longer exists.
2. You may have purchased a policy to assist you in retirement. But your financial situation is now such that you no longer need the policy. It could be that your employer has provided you with an adequate retirement plan or simply that your financial circumstances have changed.
3. Maybe you have an insurance policy in force primarily to pay off your home mortgage in the event of premature death. And now the balance owed on the mortgage may be so modest (or paid off) that you no longer need the policy. Or, perhaps the house has since been sold and your current home has no indebtedness.
4. Perhaps you purchased a policy for some business purpose. And now the additional financial protection is no longer needed. Maybe the business has been sold or there is now enough cash available to meet the obligations in the event of your death.
5. Because of concerns over the future payment of estate taxes, you may have purchased a policy to protect your estate and heirs from having to sell assets in order to raise cash for the payment of taxes. But now your estate may be sufficiently liquid, or the increase in the federal estate tax exemption level has made the life insurance coverage unnecessary.
Using Life Insurance for Wealth Replacement
Life insurance can also be used to provide "wealth replacement" for heirs when other planned gifts (i.e., charitable remainder trusts) are made. For example, if you establish a Charitable Remainder Trust, you may choose to set up an irrevocable life insurance trust. Death proceeds from that trust could be designated to benefit your heirs, thereby replacing the assets that were used to establish the Charitable Remainder Trust.
For more information about a gift of life insurance, please call (504) 671-5412