|
The Estate
Bond—Giving Much More to your Family and Much Less to the
Government.
Here's the problem
Like many people in or approaching
retirement, your financial plans may include an element of
saving that will never be spent--the intention is to pass this
money to those you care about most. I like to call this "money
that we are paying taxes on that we never plan to spend."
The problem is that this
strategy's success is largely based on the investment's rate
of return, which at the time of writing this article, is at
historic lows. And, unfortunately, the higher the return, the
more tax one pays. This means that estates may end up smaller
than anticipated.
What are your options?
You can continue to pay tax on the
income earned from your savings or you can invest the funds
using a financial planning strategy known as an "Estate Bond."
This attractive alternative to
traditional taxable investments offers:
- A large, immediate estate value
- Tax-sheltered growth of cash values
- A tax-free maturity value at death
- No money management decisions
- Reduced estate settlement costs, if you've named a
beneficiary
- Potential for creditor protection, if you've made an
appropriate beneficiary designation
- Liquidity , if you require it
Here's how it works
The Estate Bond moves savings from
a tax-exposed investment to an exempt life insurance policy. A
universal life insurance policy provides immediate life
insurance protection and an investment within the policy that
accumulates on a tax-free basis. When you die, your heirs
receive the proceeds tax-free. When you take advantage of the
Estate Bond financial planning strategy, you not only increase
the size of your estate, you also reduce the amount of tax you
pay.
Here is an example
of how the Estate Bond Financial planning strategy can provide
a larger estate for your heirs:
| Personal Information |
Female, age 60, non-smoker |
| Personal Tax rate |
46% |
| Before tax investment rate
for traditional investment |
6.00% |
| After tax investment rate for
traditional investment |
3.24% |
| Universal Life rate of return |
6% |
| Initial death benefit |
$500,000 |
| Deposits |
$25,000 per year for 10 years
|
| Estate Bond |
|
Traditional Investment
|
| Accumulated Value |
Before tax redemption value |
Net Estate value |
Year |
Annual Interest |
Tax Payable |
Net Estate Value |
| $ 23,767 |
5,535 |
523,767 |
1 |
$ 1,500 |
720 |
25,780 |
| $ 132,592 |
108,282 |
632,592 |
5 |
$ 7,983 |
3,832 |
137,198 |
| $ 309,857 |
309,857 |
809,857 |
10 |
$ 17,291 |
8,300 |
297,177 |
| $ 391,671 |
391,671 |
891,617 |
15 |
$ 20,162 |
9,678 |
346,521 |
| $ 481,227 |
481,227 |
981,227 |
20 |
$23,510 |
11,285 |
404,059 |
| $ 570,415 |
570,415 |
1,070,415 |
25 |
$27,414 |
13,159 |
471,150 |
An Estate Bond can increase the amount of cash that will
go to your heirs by over 100%. In this example, the heirs
received $600,000 more than a traditional investment strategy.
If you know of anyone with "money that they are paying
taxes on that they never plan on spending," tell them about
the Estate Bond. It could provide their families with much
more money compared to their current estate arrangement...and
send a lot less to the government!
|
