Financing Your Life Insurance Premiums

This interesting idea comes to us today by Greg Herman-Giddens of The North Carolina Estate Planning Blog.  Greg writes:

Many of us could use more insurance for estate planning  purposes, such as financial security  for loved ones or payment of estate taxes. Most of us also have an unused asset, our insurance capacity. That is the amount of insurance for which we could qualify and is based on the projected value of our assets at life expectancy. For most people, the capacity is unused because of a reluctance to pay hefty insurance premiums.

How do we reach this capacity without bankrupting ourselves:  use the death benefit of the policy itself as the collateral for the loan you would use to pay the premiums.

Greg points out – rightfully so – that there would be no estate tax ramifications of the policy is held in an irrevocable life insurance trust and the life settlement market provides (potentially anyways) an exit strategy to accommodate an unforeseen change in circumstances.

Great post Greg, thanks!.

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