What are your resolutions for 2023? Two of the most popular resolutions this year are to improve your mental health and improve your finances. Or maybe you’ve set more specific goals within those categories, like saving for retirement, growing your business, or investing in your children’s future.
If you hope to accomplish any of these things in 2023, premium or partial financing can be a valuable tool to help you get there. In this article, we’ll unpack three key ways that investing in premium financed life this year can set you up for greater success in the future, improving both your financial and mental health in the process.
1. Generate Tax-Free Retirement Income with Premium Financing
Premium financed life insurance doesn’t only benefit your loved ones after your death, it can also be used as a powerful wealth-building tool during your lifetime.
Here’s how a properly-structured premium financed life insurance policy can generate tax-free income for you during retirement:
- When you purchase life insurance, the money you put in can be referred to as a forced savings tool.
- You can later borrow money from that life insurance plan.
- Using life insurance you can take advantage of tax free withdrawals.
- Upon your death, the life insurance policy will also reduce the amount of estate taxes your heirs have to pay
This is a valuable alternative to contributing to a tax-qualified plan like a 401(k). Essentially, purchasing life insurance means you’ll pay taxes on a smaller amount of money now, whereas contributing to a 401(k) gives you a tax deduction for the short term but in the end requires you to pay significantly higher taxes in the future. This can add up to significant tax savings over time.
2. Secure Your Business’ Legacy with Key Person Insurance
There’s no getting around it: Owning a business can be stressful. But imagine how much peace of mind you’d experience from knowing that your business is set up to succeed even if the unexpected happens.
Premium finance is an excellent vehicle for purchasing key man insurance, which allows you to designate an individual who is vital to the business’ success. If that person passes away, a death benefit is paid to the company to help cover any financial strain associated with losing a key employee.
If you co-own a business with one or more partners, you can also use life insurance to fund buy-sell agreements. There are several ways to structure these policies — sometimes the owners purchase a policy on their co-owners; other times the business purchases policies for each of the co-owners — but the death benefit generally allows a business owner to buy their partner’s share of the business upon their passing.
3. Ensure Your Family’s Financial Security
One of the best ways to secure your legacy is by making sure your children will be provided for even after you’re gone. Financed life insurance allows you to do this more effectively, making it possible for you to purchase a larger life insurance policy than you might consider otherwise.
This strategy can also make it easier on your family by reducing the amount of estate tax they may have to pay. Heirs are currently required to pay an estate tax on any amount over the federal limit, which is currently $12.92 million for 2023. By setting up a Premium Financed Life Insurance policy properly there are ways to avoid paying additional estate taxes. At Goheen Companies we can assist you with different options, like a LILP or ILIT, that can both secure your financial legacy and make your family’s lives easier in a difficult and stressful time.
This is an excellent way to both secure your financial legacy and make your children’s lives easier in a difficult and stressful time.
Partner with Goheen Companies to Build a Policy that Fits Your Needs
Until recently, the high barrier to entry for premium financing made it where even many high-net-worth individuals could not take advantage of the strategy. At some companies, the minimum net worth for premium financing is as high as $15M.
Goheen Companies’ newest product – Life Insurance Financed Equity — is here to change that. This partial financed strategy is available to high-income individuals with a net worth of $2.5M or more in assets or investments.
L.I.F.E. makes it possible for more individuals than ever to super-charge their tax-free retirement strategy and secure their legacy, all while using their policy as collateral.
If you’re interested in learning more about how premium or partial financing can help turn your 2023 resolutions into a reality, please contact us today.