Assisting your clients with planning for the transition of wealth to their children and grandchildren doesn’t have to be a daunting task. Start the conversations with your clients now so they begin to understand the impact of tax on their estate assets.
Do your clients understand the tax implications that occur upon death? There would be a deemed disposition of all their assets at fair market value which could result in tax (excludes the principle residence). There is, however, an exception for assets rolled to a spouse.
Assets that pass through the estate before being distributed to the beneficiaries are subject to probate fees. As well, there could be will challenges and known or unknown creditors that could reduce the assets and impact of the clients’ estate goals.
Once your clients better understand the impact, they will likely be concerned about the overall effect to their estate value and objectives related to the disposition of their assets. A life insurance policy with a named beneficiary can help alleviate many of those concerns. As well, investment assets can be transferred into an exempt life insurance policy and investment growth during their lifetimes would not be subject to tax unless funds were withdrawn. This would allow capital to grow in a more effective manner and the insurance proceeds would add to the amount of capital available for their family.
Help your clients understand that insurance proceeds are not subject to income tax and by designating a beneficiary (other than the estate) of the policy, the proceeds pass outside of the estate and therefore are not subject to probate fees. Additional benefits of designating a beneficiary are creditor protection and the beneficiary designation cannot be disputed through a will challenge.
Support your clients to achieve their estate goals by increasing estate assets through a beneficiary designation in a life insurance policy. Please note that new rules, coming into effect January 1, 2017, will not offer the same savings as the policies issued before 2017 would.
Speak with your clients about transferring their wealth to the next generation. These discussions are important to have sooner rather than later.
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Sharing Your Wealth with the Next Generation