A gift that will be treasured forever is a rarity. However, there is a gift which can go a long way to fulfilling your aspirations of a gift that will last forever. Long after the candy is gone, the toys are broken, and the clothes are outgrown, this gift will continue giving and increase in value. It’s the gift of life insurance.
Life insurance is an appropriate gift for two reasons. First, a child or grandchild can utilize the cash value in a whole life insurance policy to defray future education expenses or to supplement retirement benefits.
Second, making a gift of cash for the purchase of life insurance removes the gifted cash from inclusion in the gross estate of the donor for federal estate tax purposes, and provides life insurance protection for the child or grandchild in later years.
A gift of life insurance will also show the importance you place on insurance. This helps to educate the child in the area of insurance and learn to build a solid foundation for future financial programs.
Life insurance purchased on the life of a young child or grandchild is relatively inexpensive because it’s based on the child’s/grandchild’s current health. Since the premiums are low it’s possible to build a solid foundation for your child or grandchild with only one premium.
Purchasing a policy at a young age can guarantee the child insurance protection when he/she is older and starts a family. It also helps since a child’s future insurance needs may dwarf your own.
You may consider setting up an irrevocable insurance trust for your child or grandchild. However, every precaution should be taken in establishing and funding an irrevocable insurance trust if the desired tax benefits are to be realized. If there is any connection between the insured and insurance policy, the IRS may try to establish that the trustee is merely an “agent” of the insured. This could cause the policy to be included in the estate of the donor. You should contact your attorney and/or accountant to learn more about establishing an insurance trust.
There are several tax advantages in choosing life insurance as a gift for a child or grandchild.
One of the tax advantages is that each year a $14,000 gift can be given gift tax-free. If your spouse participates, the maximum annual tax-free gift is $28,000. The gift is also removed from your estate.
Each year you do not take advantage of the gift tax law, you are increasing the value of your estate and the estate taxes that will be paid. In addition, you may be unintentionally disinheriting your children and grandchildren since their inheritance would go toward paying estate taxes.
For more information visit www.countryfinancial.com under the Tools and Resources tab. Jamey Toney, CFP®, ChFC® is an exclusive multi-line agent with COUNTRY Financial. He holds a Chartered Financial Consultant designation and is a CERTIFIED FINANCIAL PLANNER. For more information call 770-985-9757.
Jamey Toney is an exclusive multiline agent representing COUNTRY Financial. He holds a Chartered Financial Consultant designation.For more information on tornado safety visit the COUNTRY Financial website at http://www.countryfinancial.com.
Like them on Facebook at http://www.facebook.com/jameytoneycountryfinancial
Jamey Toney, Country Financial
2148 Main St East, Snellville GA 30078
(770) 985-9757
