Participating In Your Life Insurance – A Good Investment?

Life insurance is a vital and necessary part of every financial plan. But there are a whole lot of life insurance types and products out there – so making the decision about what’s right for your personal situation, budget and longer-term financial and retirement goals can be difficult.
In this column, we will focus on one type of insurance that you should consider if your needs and wants match this profile:

• You have a low to moderate tolerance for risk.

• You want protection for a lifetime with guaranteed premiums, guaranteed cash values and tax-free benefits guaranteed for your beneficiaries.

• You want an investment component included with your insurance coverage providing the potential for tax-deferred growth without the need to manage those investments.

• You want to build tax-advantaged savings that you can draw upon as needed for personal or business needs (although any cash values withdrawn from such a policy may be subject to tax).

You can get all of these benefits and a few more from Participating Life Insurance or also known as PAR Whole Life.., Participating Insurance combines life insurance with an investment component that also pays dividends.
PAR Insurance works like this:

• Your premiums go into an account with the premiums from all the other policyholders holding a PAR policy with that life insurance company.

• The amount of your premiums and the other coverages in your policy are calculated using long-term assumptions for death claims, investment returns and other factors. Your guaranteed premium, values and death benefit are based on these factors and are guaranteed for the life of your policy.

• The pooled premiums from all policyholders are invested in a balanced portfolio managed by investment professionals.

• When the actual returns on these investments are greater than the assumptions in place for the life of the policy, there is an account surplus that is paid to policy owners in the form of dividends (although policy owner dividends are not guaranteed).

• Dividends have a cash value that is credited to your policy and owned by you. You can use the dividends to: increase the policy’s cash value on a tax-advantaged basis, to withdraw cash from your policy or borrow against it, to buy additional insurance without the need to prove your insurability, or to lower your out-of-pocket premiums.

PAR insurance products are available with many coverage and payment options. Your professional advisor can show you how to tailor your insurance coverage to meet your needs today and tomorrow.

Time To Step Away From Your Business?

Maybe not today or tomorrow, but one day in the not so distant future, you’re going to do it: Step away from your business and hand the responsibility for its operation to someone else.

But who will it be and how will you do it? There are plenty of tax, legal, financial and estate issues to consider – and that’s where business succession planning comes in. Here are some of the key elements you need to consider.

• Don’t leave things to chance. To avoid the loss of your business or its forced sale at substantially reduced value – and to ensure your family will have sufficient income to sustain the lifestyle you want for them – look to disability, critical illness and life insurance as a means of protecting what you’ve built.

• Make it legal. Establish a buy-sell agreement that sets out the terms and conditions under which your share of the business will be acquired by co-owners, partners or other stakeholders.

• Plan for retirement. If you will be relying on your business as a source of retirement income, you need a plan for converting its value to cash when the time comes. There are three basic ways to do that: Sell your business as a going concern to an outsider; wind it down while you slowly deplete its investments in a tax-efficient manner; or pass it on to a relative, co-owner or key employee.

• Prepare for the tax burden. The proceeds from the sale or transfer or your business could be subject to income and capital gains taxes. By planning now, you can minimize the tax that will be paid by you, your estate, or your heirs. For example, a family trust or estate freeze could effectively reduce taxes when you transfer ownership to family members.

Life insurance can be a cost-effective way of financing the succession without saddling the business with the need to borrow money.

• Put your wishes in your will. It’s critical that you make provision for the disposition of your business in your will, especially if you’re planning on passing it on to a family member after your death. Set out how the family member will acquire the business and avoid disputes by ensuring every family member is taken care of in an equitable way.

The ‘exit strategy’ you choose should be right for you and your family. To be sure you’ve got it ‘right’ get input from your accounting, legal and financial advisors and your family – that’s the best way to a successful succession.