How to Transfer Wealth?
By: Jacob Hagg
CDs vs. Life Insurance: Which is the Best Option When Passing on Funds?
Many of my clients can relate to this situation: they were told that a CD (Certificate of Deposit) is an investment strategy that can provide guarantees and stability. That is absolutely true, but when it comes time to think about how to pass the money from a CD to children or grandchildren, it may not be the most efficient way to do so.
In this example, Jane is a 69-year-old non-smoker. Jane has a $20,000 CD in a local bank and plans to leave it to her two children and two grandchildren. She wishes it was more, but with the low interest rates and not wanting to risk the funds in the market, she just doesn’t see how she could increase her legacy today.
By RE-POSITIONING your funds you can increase the amount of your legacy today compared to the slow growth of a CD.
If Jane uses Liberty Bankers Life’s Single Premium Whole Life, her $20,000 investment turns into $34,246 immediately.* Giving her a guaranteed $14,246 gain on top of his $20,000 from day one!*
If Jane left her money in the CD, which was currently paying 1.0%, it would take her approximately 58 years to accumulate the same benefit meaning she would be 127 years old before the cd caught up with the benefit from the single premium life insurance.
Benefits are income tax free.
In a non-qualified CD the earnings are taxable each year as income.
In a life insurance policy, the growth in the cash value is tax-deferred and only taxed if the policy owner makes a withdrawal or surrenders the policy value.
By shifting the money from the CD to life insurance, the member can reduce their tax liability. Life insurance increases the benefit that will be paid to the beneficiary at death due to the leveraging power of the policy. Bottom line, death benefits are paid income tax free to the beneficiary.
In Jane’s example, the $20,000 payment in a Single Premium Whole Life has already turned into $34,246. This would allow her to leave each of her four children and grandchildren a tax-free benefit of $8561 each.
Access to the cash value
Jane will also have access to the cash value whenever she needs! If the unforeseen event happens and she needs access, simply call liberty bankers and they will assist her in accessing her money whenever she needs.
Accelerated death benefit
What if Jane can no longer take care of herself and needs help with two or more activities of daily living? Not to worry, she will have access to the death benefit early using the accelerated death benefit rider. This benefit can help assist Jane in paying for long term care costs.
Life insurance provides security.
To discuss your financial options when passing on funds to heirs, call your agent or Christian Insurance Group at 616-365-5777.