Protect Your Wealth with an

Inter-generational Wealth Transfer

You’re looking to transfer wealth to your grandchildren. You want to control the policy and the funding during your lifetime. Upon your passing you want to provide your grandchildren with funds that they can use for housing, education, or whatever they choose. You can also gift them a fully paid up life insurance policy at that time as well. And, you want to do all of this in a tax efficient fashion. A properly designed life insurance policy can achieve all of this.

How It Works

During your lifetime you deposit funds into an insurance policy. Those funds grow in a tax sheltered environment. Upon your passing, the ownership of the funds transfer to your grandchild, allowing them to access the funds at their tax rate instead of yours.

1

Wealth Accumulation Stage

The strategy starts with a joint last to die universal life insurance policy with yourself and your grandchild as the insureds. During this time, you maintain ownership and control of the policy. The policy pays a death benefit on the second death. Insurance costs are minimized as the premiums will be primarily based on your grandchild’s age and insurability. Investment growth inside the policy is on a tax sheltered basis.
2

Wealth Transfer Stage

After you pass, ownership of the policy transfers to your grandchild. They now have a life insurance policy in their name, and have access to the funds inside the policy. Withdrawals above the ACB of the policy (roughly the tax sheltered growth) will be taxed at your grandchild’s tax rate instead of yours. Alternatively they may use the investments as collateral for a loan, effectively giving them access to the tax sheltered funds without tax implications.

The policy can also be structured to become fully paid up upon your death, gifting your grandchild a fully paid up lifetime policy in addition to the tax sheltered investments.

Example:

Joint last to die universal life. Grandparent is Female age 65 Non-smoker and grandchild is Male age 18 Non-smoker. Premiums of $12,000 per year for 20 years are paid into the policy. Interest assumed at 6%. (values are not guaranteed)

 Cash ValueDeath Benefit
Year 15$256,000$1,256,000
Year 20$402,000$1,355,000

So if you should pass in year 20 of the policy, your grandchild now has a life insurance policy on their life with a death benefit of $1,355,000 and a cash value of $402,000.

Our advanced insurance specialists can provide you full details of how this can apply in your specific circumstances. Our first consultation starts with a detailed explanation of the strategy and information gathering. We’ll schedule a second consultation to provide and explain proposals. Lastly, we’ll step you through the application process. Start with an initial consultation.

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