Cash Value Life Insurance as a Tax Deferral Strategy: introduction
What is cash value life insurance?
Cash-value life insurance is a type of permanent life insurance featuring cash value savings.
Because it is permanent life insurance, it lasts the holder’s lifetime. The policyholder of cash value life insurance may use the cash value for various purposes, such as using it as a source of loans or cash to pay policy premiums.
Cash-value life insurance usually has a higher premium than term life insurance because of the cash-value component. Most policies require policyholders to pay a fixed-level premium payment, a portion of which is allocated toward the insurance cost, with the remaining amount deposited in a cash-value account. Policyholders may earn interest on the funds in their cash-value account, which increases over time. Your beneficiaries will receive an income-tax-free sum once you have passed away.
However, then cash value of a policy is generally considered an available asset for Medicaid qualification. It is important to consult with an elder law firm that understands Medicaid law prior to incorporating cash value life insurance into estate planning.
Estate Planning is an important component of financial planning. At Bach, Jacobs & Byrne, P.A., we address tax issues and avoidance as part of estate planning. If you live in Sarasota, Manatee, or Charlotte County, contact Bach, Jacobs and Byrne, P.A. at (941) 906-1231 to evaluate whether your estate plan is tax efficient.