Never Money

Do you have any "Never Money"?

There are three types of Money:

• Everyday Money
• Someday Money
• Never Money

Everyday money is for your current living expenses like, food, clothing, mortgage, and other incidentals. Someday money is what you are saving to use in the future for things like travel, a second home, retirement, and rainy day funds. Never money, is what you've set aside to be passed on to others like a spouse, children, grandchildren or even a charity. If you have Never Money, there is ways to make it work for you but some are taxable, some are tax deferred, and some are tax free. It is important to figure out which would be best for you. Each have their own benefits but my focus here will be on the tax free option which uses a single premium whole life insurance policy. This is a safe method of guaranteeing a certain level of growth, the money accumulates with no taxes unless withdrawn and the death benefit is income tax free. Here is an example of how this looks using different methods and why the life insurance may be the most effective way to pass on money to heirs or charity.

Meet Etta Mae:              

   65 Years old

   Good Health

   Has $50,000 in CD

   Plans to leave $25,000 to each of her two grandchildren.

If she leaves it in a taxable account like the CD, taxes will have to be paid yearly on interest earned. The value after 10 years would be $58,098. Each grandchild would receive $29,049

A tax deferred account - like a single premium deferred annuity, interest would be build and no taxes would be due until the money was withdrawn. The account would be valued at $68,506 after 10 years but $18,506 would be taxable. Each grandchild would receive $31,940. 

If the money is deposited into a Single Premium Whole Life Policy - which would be Tax Free. The $50,000  would purchase a policy with an immediate death benefit of $103,699 which is payable whenever her death occurs. No income tax would be due at her death and each grandchild would receive $51,850. 

    

Using the easiest and most income tax efficient way to transfer a portion of your liquid assets to your loved ones through life insurance Etta Mae is able to leverage her Never Money into a much larger gift and maximize the amount she was able to leave her grandchildren.