With a permanent Universal Life Insurance (UL) policy, there are many options and tax advantages available within the plan. Death benefits may vary, funds can be invested in tax-sheltered accounts, cost and types of insurance can be manipulated – all to the benefit of the consumer’s goals! What are the primary benefits of Universal Life (UL) for Estate Planning? The options abound:
• The death benefit is adjustable. The amount of life insurance can be increased or decreased to reflect an insured’s changing needs, and there are multiple options available when creating a plan. Typically, a person will choose an increasing death benefit that will pay out all life proceeds as well as any cash in the plan at time of death. Or, a person could choose a plan that pays out the death benefit as well as all premiums paid into the plan. This option ensures that family assets will not be eroded due to premium payments for the life insurance policy. A person may also choose a level death benefit, however the advantages of this structure are limited. Or, if a person eventually is insured, or does not require their current amount of insurance on their policy, they can simply reduce the death benefit. In the end, a policy’s death benefit can be structured to suit the needs and goals of the insured.
• Insure multiple lives in a UL plan Several lives can be insured or added to one plan, including a spouse and children. Business associates may also be named as multiple insured’s on a business policy.
• Special riders can be added In some cases, term riders can be added to the policy, allowing for a structured policy that addresses insurance needs now and in the future. For example, you can structure a policy with permanent Universal Life insurance as a base amount, then add a Term 10 or Term 20 rider.
• Disability riders can be added Policies may provide a disability rider called a waiver of premium. Upon disability, the policy premium can be waived until such a time as the person is no longer disabled.
• Create capitalized income for a surviving spouse Life insurance proceeds can be structured as an annuity, thereby providing lifetime income for the surviving spouse.
• Capital creation can be deferred Alternatively you can arrange to have the death benefit paid after the second spouse’s death to maximize the value of your family’s inheritance or meet your estate’s tax liabilities. These policies are typically called Joint Last to Die policies.