Some people find it difficult to even contemplate the purchase of life insurance since it reminds them of their own mortality. Of course, investing in a life insurance policy is the responsible thing to do when you are a young adult. Doing so is even more important once you have a family. The benefits of having such a policy are not limited to your estate, however. You can benefit from these policies while you are alive as well.
Investing in a sufficient policy can help your mental state while you are alive. You will gain peace of mind from knowing that your family is provided for after you are gone. The money can be used for your children's education, to pay the mortgage, and to give your spouse the financial ability to recover from your loss. You may feel that you will live forever, but, of course, that is not true. Facing your mortality by purchasing a life insurance policy is the responsible thing to do.
When you die, your family should receive the entire amount of the policy. If your policy is worth $300,000 when you die, your heirs should get the whole amount because they will not have to pay federal income tax on the accumulated cash value. Also, you can transfer the ownership of your policy to a trust or someone else while you are alive so your heirs do not have to pay possible estate taxes. This transfer must be completed at least three years before you die, however.
You can benefit from a 1035 exchange while you are alive to avoid paying taxes. If you want to transfer the funds from your policy, annuity, or endowment to a new policy, you can do so without having to pay taxes. When you make this move, the amount of money your policy has accumulated since you first purchased it will not be taxed as a capital gain. This method allows you to defer the gain and at least postpone additional taxes. Before you change policies, you do need to consult with your financial advisor to make certain you are getting the greatest tax benefits possible.
Buying a life insurance policy has benefits for you during your life as well as for your heirs after you die. Investigate the different types of policies available to you with your insurance agent and your financial guide before you purchase one. You and your family will be better protected if you do. To learn more, contact a company like 1035 Exchange.