Utilizing Cash Value Life Insurance for Tax Diversification

Cash value life insurance can be used to create tax diversification because the build up growth inside the policy can be taken out as loans, which if done correctly and managed properly, are forgiven at death under the current tax code. Affluent investors have been utilizing cash value life insurance for many years as a way of hedging against future tax rates. In fact, rumor has it that Walt Disney borrowed money from his Whole Life insurance policy to start one of the greatest companies of all time. The concept of tax diversification utilizing cash value life insurance is to create an alternative asset class with favorable taxation treatment. People who have a need for life insurance, want to save more money, understand the long-term nature of the contract, and are afraid of higher tax rates in the future, are great candidates for permanent life insurance.

Structuring the policy with less death benefit as possible without violating modified endowment contract rules will build more cash value than policies designed with high death benefit amounts. Life insurance agents are generally paid a commission based on the death benefit of the policy, which means… the more death benefit, the more they are paid. This is why it is extremely important to work with a reputable agent who is honest and informed on how to properly design cash value life insurance policies.

Several books explain the advantages of utilizing cash value life insurance. A good friend to Pacific Insurance Group is a fellow Washingtonian by the name Patrick Kelley, he wrote Tax-Free Retirement. If you would like a copy of the book, give us a call and one of our agents will be happy to help. Once you have read the book someone from our Bellevue Washington office can generate a customized FREE illustration proposal. We look forward to opportunity of working with you, give us a call directly at 425- 246-4222, or schedule an appointment online at www.pacificinsurancegroup.com

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