1. Life insurance is a great planning tool for young families.
Young couples who are just starting a life together do not usually have a lot of property. They just begin their careers, so their earnings are not yet at their peak. Besides, they may have educational or real estate debts before banks. The childbirth is often an event that prompts new parents to purchase a life insurance policy, since in the event of the death of one of them, the second spouse will have enough funds to keep home and raise children.
2. Life insurance is not subject to property tax of the insured
Many people are unsure about life insurance taxation. In most cases, life insurance return is not taxable income for the beneficiary. For example, if aunt appoints her niece the heiress of her $100,000 life insurance policy, that $100,000 are not taxable income for the latter.
3. Life insurance can be an easy way to solve a complex problem
Life insurance can be a good way to deal with stressful planning situations. For instance, spouses in the second marriage who want to leave assets before marriage to children from a previous marriage, but also want to take care of their spouse, can purchase life insurance. Business owners who want to make sure their surviving partners have the capital to continue their business, can purchase life insurance. Parents who want to keep their favorite vacation home but realize that the maintenance cost of the property will be onerous for their children, can use life insurance to provide funds to pay the maintenance costs after they die. Families with children with special needs can use life insurance to fund the trust.
4. Life insurance can be a good way to pay inheritance taxes
For those with taxable assets, life insurance can be a good way to provide liquidity for this tax, which is payable nine months after death.
5. Review your policy regularly
Life insurance is an asset that needs attention. The needs change over time, and life insurance policy purchased 10 years ago may not be sufficient or is no longer needed. A term policy can be a great way to deal with a short-term situation, such as providing funds to educate children or pay off a mortgage. After the kids graduate from college or the mortgage is paid, the purpose of the policy might change, it can be a retirement plan or investment insurance.
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