Estate Planning

What Is a Gifting Strategy?

Taxes are likely to rise in the coming decades, which means you might have to rethink the financial legacy you’ll leave behind for your families. Your family could face significant tax burdens if you are not smart about your planning and do so without the support of experienced professionals, such as an attorney and a CPA.

Life insurance policies might be one way to enable you to leave behind a gift that safely provides for your loved ones without generating an estate tax burden. Both estate tax and income tax rates are likely to rise in the future due to ongoing increases in the national debt.

So if you have the possibility to generate an income strategy for your loved ones that was estate tax free, would you take it? One such option is using a life insurance policy. There are a very few ways for people to receive income that is free from tax. Life insurance proceeds themselves are income tax free and loans from a life insurance plan are also tax free.

This means that depending on the distribution method they choose, your beneficiaries on your life insurance policy might be able to borrow against their death benefit proceeds income tax free. This means that when they pass, the life insurance proceeds will pay back the outstanding loan balance and the interest, income tax free, enabling the remaining life insurance proceeds to go to their own heirs.

This legacy gifting opportunity should only be done when you have consulted with your financial professional and decided whether or not this aligns with the rest of your goals.

When you meet with a Michigan estate planning lawyer, you can discuss different gifting strategies to help you accomplish your goals.