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Looking to Fund a Legacy? Try Life Insurance

By Rachel Meier September 20, 2017

When you think of life insurance, you probably see it as a way to help replace your income and protect your savings should something happen to you. But did you know that it can also help you fund a legacy?
Investment Strategist Rachel Meier explains how this unique strategy works:

Q. Who might want to consider doing this?
A. Life insurance can help if you intend to leave a specific dollar amount to your heirs or a charity. It can also be an effective strategy if you own a business, real estate, farmland or other assets that can’t be divided easily. In addition, this strategy is a tax-efficient way to transfer wealth.

The amount and type of insurance you choose depend on your personal goals and situation. But since this strategy is to remain in place for your lifetime, you will need to purchase permanent life insurance, which may also build up cash value. While a term policy can be more affordable, it covers only a specific time frame. When the term is up or you stop paying the premium, the coverage ends.

Q. How might this strategy work?

A. Let’s say you have identified a specific asset you want your loved ones or a charity to receive – such as a savings account, stock or other financial assets – but you also need to benefit from that asset during your lifetime. Instead of giving the asset outright, you can purchase a permanent life insurance policy to cover the specific amount you wish to leave. This can help ensure the amount you desire is left at your passing versus potentially limiting your spending during your lifetime.

Life insurance can also help fill any gaps you might have between what you’ve saved and what you’d like to leave behind. It can provide you flexibility in the event of your illness or other significant, unexpected costs, by allowing you to access your savings and still help ensure you can leave your desired legacy through the life insurance benefit.

Q. What about assets that can’t be divided easily? How can life insurance help in those situations?

A. If you own a business, real estate, farmland or another large asset, it might not be possible to simply divide this among your heirs. With permanent life insurance, you can leave the specific asset to one beneficiary while leaving an equivalent value in insurance proceeds to others. Also, with this type of inheritance, your heirs might end up paying ongoing maintenance costs, such as taxes, insurance or operating expenses. Life insurance can provide your heirs with the money to pay these costs, or even liquidity to transition a business.

Q. What other legacy uses would you recommend for life insurance?

A. If you’re the primary caregiver for someone with special needs, life insurance can help ensure your loved one continues to be cared for after you pass. Edward Jones recommends that you work with a qualified attorney who can help you create a trust or other plans to manage the assets on your loved one’s behalf.

Q. What else should viewers be aware of before they use this strategy?

A. You’ll need to decide:

  • Which type of permanent policy (if any) is right for you
  • How much life insurance you need and whether you can afford it
  • If you’re insurable
  • How much flexibility you need

Your Edward Jones financial advisor can look at your entire financial picture and then work with your attorney and tax professional to help you decide if this approach is right for you. He or she can also provide a quote so you can have the information you need to make the best decision.

Important Information:

Edward Jones, its employees and financial advisors are not estate planners and cannot provide tax or legal advice. You should consult your estate-planning attorney or qualified tax advisor regarding your situation.

Edward Jones is a licensed insurance producer in all states and Washington, D.C., through Edward D. Jones & Co., L.P. and in California, New Mexico and Massachusetts through Edward Jones Insurance Agency of California, L.L.C.; Edward Jones Insurance Agency of New Mexico, L.L.C.; and Edward Jones Insurance Agency of Massachusetts, L.L.C.

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