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Is This Tool in Your Financial Kit?

Is This Tool in Your Financial Kit?

September 19, 2023

When we utter the words “life insurance” to our clients, we are generally met with an eye roll or glazed, far away look in the eyes.  The perception is that life insurance is boring or that it has limited use when talking about an overall financial plan.  

This view could not be more wrong.  And with September being Life Insurance Awareness month, we wanted to take a moment to highlight the flexibility of life insurance when it comes to both personal and business planning.

At ASE Private Wealth™, we view life insurance as a potentially powerful part of your overall financial plan that can enhance outcomes while providing peace of mind as it relates to your family and your business.  Here is a sampling of what we mean.

Life Insurance In Personal Planning:

  1. Estate Planning and Wealth Transfer.   One of the most commonly recognized uses of life insurance is as part of your estate plan.  Life insurance can be used to transfer wealth efficiently to heirs while also potentially mitigating estate taxes.  
  2. Supplemental Retirement Income.  Certain types of life insurance policies include a cash value component that can be used for a variety of purposes, including supplemental retirement income.  The cash value can be accessed via loans or withdrawals, often on a tax-advantaged or tax-free basis, including as a way to help provide an income stream during your retirement.
  3. Wealth Replacement.  For HNW individuals whose estate faces taxation upon their passing, life insurance can help replace that loss and ensure that heirs receive their inheritance as intended.  In a similar way, life insurance can be used to help equalize inheritance when some heirs will be receiving certain assets (such as a business) that will not be passed down to others.
  4. Long-Term Care Planning.  With more and more individuals facing the reality of requiring long-term care at some point in their lives, riders available on many life insurance policies can help prevent the erosion of an estate to pay for expensive care.
  5. Charitable Giving.  HNW individuals who want to leave a charitable legacy at their passing without depleting their estate can do so via life insurance.  By naming a charitable organization as the beneficiary of a life insurance policy, you can meet your charitable goals without relying upon your estate.
  6. Life Insurance as an Asset Class.  Increasingly, life insurance is being viewed as an asset class within your overall portfolio.  Under this view, life insurance can add diversification to your portfolio and help improve the risk-adjusted return in the portion of your wealth you want to pass on to the next generation

Life Insurance in Business Planning:

  1. Buy-Sell Funding.  Privately held businesses often include buy-sell provisions in their organizing documents to govern what happens when one shareholder leaves the business via death or other reasons.  However, even with a plan, there is still a question of how to fund the liability created by a buy-sell provision without selling company assets or otherwise harming operations.  Life insurance is a commonly used method that provides the liquidity needed to meet the obligations of a buy-sell provision.
  2. Key Person.  In the event of the death or disability of a key employee, life insurance can provide the financial cushion necessary to keep the business moving forward.  The funds from this type of insurance can help in the recruitment and training of a new employee or help to offset any financial losses incurred due to the loss of such a key employee.  
  3. Recruiting, Rewarding and Retaining Talent.  In a competitive hiring landscape, life insurance can be a helpful tool to both recruit and retain talent.  There are a number of direct (using life insurance as part of an overall compensation package) and indirect (using life insurance as an informal funding source of retirement benefit plans) ways that life insurance can make your company a more attractive option for your employees.  

With our recent affiliation with Lion Street, ASE Private Wealth™ has access to the financial products, intellectual capital and specialized resources needed to meet the sophisticated needs of HNW and corporate clients.  Now is a great time to talk about your current life insurance portfolio to ensure that it meets your personal and business needs and, if not, make any necessary changes.