Ways Life Insurance Could Help Your Family

Have you ever considered getting life insurance? Many try to protect their families from unforeseen circumstances. In fact, it can be an important financial component of a family’s liquidity plan and provide significant tax-free dollars upon the death of a loved one. While there are numerous reasons to own life insurance, this overview will cover a few considerations as it pertains to creating liquidity, or easy access to cash, for a family member’s passing.

Often, the beneficiaries are the spouse, partner, or children of the deceased person who receives these funds to continue maintaining their standard of living. While certain clients have enough assets to be considered self-insured in case of their untimely death, not everyone or their family is at the point in their financial journey to go without the protection life insurance provides. The correct amount of coverage is different for everyone; however, it is common to start by looking at the amount of total assets owned, inflation-adjusted income that will need to be replaced, debt to be paid, and education to be funded.

For business owners, obtaining key-person insurance on the life of the owner can assist the business in continuing operations by generating liquidity and ensuring business continuity. This is accomplished by having a plan in place with the company or business partner(s) to buyout the deceased owner’s shares in the business with the life insurance death benefit proceeds, which will also provide their family with a nest-egg to live on.

For those with considerable wealth, there is the possibility your estate will need to pay either state estate taxes or federal estate taxes. Proceeds from life insurance can be made available helping the executor pay the tax bill without dipping into the retirement accounts, personal property or a family business interest. i It is important to have a properly drafted estate plan set up with a licensed estate attorney in your state to minimize estate taxes for your estate. Even so, estate taxes may be unavoidable and life insurance proceeds can help create liquidity for the payments. 

Beyond the financial component, life insurance offers peace of mind for the policy owner and the remaining family members. The owner will know their family has financial support available and the beneficiary will know they are going to be taken care of during an emotionally stressful period. 

For those who previously purchased an insurance policy, regularly reviewing the coverage amount and the intended original design of the policy should be completed every one to two years, or upon major life events such as the birth of a child, increase in income, marriage, retirement, or a major purchase. 

Life insurance tends to cost more as you age or develop medical conditions so it may not be the right fit for everyone. Reach out to your Apella Wealth financial advisor to discuss your options or to review your current policies as they relate to your goals.  

Disclosures: 

Apella Capital, LLC (“Apella”), DBA Apella Wealth is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered or excluded or exempt from registration requirements. Registration with the SEC or any state securities authority does not imply a certain level of skill or training. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, product or any non-investment-related content made reference to directly or indirectly in this material will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may not be reflective of current opinions or positions. Please note the material is provided for educational and background use only. Diversification seeks to improve performance by spreading your investment dollars into various asset classes to add balance to your portfolio. Using this methodology, however, does not guarantee a profit or protection from loss in a declining market. Past performance does not guarantee future results. All data is from sources believed to be reliable but cannot be guaranteed or warranted. 

No current or future client should assume that any discussion or information contained in this material serves as the receipt of, or as a substitute for, personalized investment advice. As with any investment strategy, there is the possibility of profitability as well as loss. 

Apella Wealth does not provide insurance services or legal advice and nothing either stated or implied here should be inferred as providing such advice. 

Estate taxes may apply to insurance proceeds. Consult a financial or tax advisor about your specific financial situation. Apella Wealth does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.