20 Different Ways to Use a Life Insurance Policy, Part 3
There are so many different ways to use a life insurance policy. That is why it is so important to determine the reason why you yourself want life insurance and what purpose it will serve for you and your family. With so many different ways to use a life insurance policy, it is important to do your research and speak with a licensed professional who will help you find the right plan for you.
As you determine why you need life insurance, be sure to check out our previous articles, which discuss additional ways to use a life insurance policy. Click here to read more !
11. Build an Irrevocable Life Insurance Trust with a Permanent Policy
Among the many ways you can use your permanent policy, you can set up an Irrevocable Life Insurance Trust (ILIT). Once in force, this trust cannot be changed. Since this trust is not part of the estate, it can be used to protect your beneficiaries from estate taxes. In addition, it protects the beneficiaries from creditors. While ILITs have several benefits, they also have their downsides. Therefore, you should meet with an estate lawyer or an experienced financial adviser before setting up the trust.
12. Use the Cash Value for College Tuition or to Pay off Debts
With a permanent policy, you put your cash value accumulation towards your child’s college tuition and/or you can use it to pay off some debts. As mentioned in previous articles, you may be subject to tax and/or a reduction in the death benefit portion of your policy if you withdraw cash from your policy.
13. Pay for Long Term Care with a Permanent Policy
For those looking to qualify for Medicaid, you may find it difficult if you have a life insurance policy exceeding $2,000. However, you can covert the life insurance into a long-term care benefit plan instead of letting your policy lapse or surrendering it. By doing this, you will transfer the ownership of your life insurance policy to a benefits administrator. As a result, you are no longer the policy holder so it won’t count against you when you apply for Medicaid. In your stead, the benefits administrator pays the monthly premiums on the policy. In addition, they also agree to pay the previous policy holder (i.e. you) a series of monthly payments based on the value of the life insurance policy.
14. Start a Business Using the Cash Value
Finding startup capital for a new business is never easy. However, if you have cash value built up within your permanent policy, then you can borrow against your policy to help fund the costs of your new business!
15. Use a Permanent Policy as an Investment Alternative
Looking for a risk free investment vehicle that is not taxable? Or are you adverse to taking risks when investing money? A cash accumulation feature of a permanent policy may be perfect for you! Regardless of how well the investments do, many policies offer a minimum rate of return. This protects you if the market is experiencing a downturn. An added benefit: the payout is tax-free!
Stay tuned to find out more ways to use a life insurance policy! Also, get with one of our life and financial experts today! They can help you choose a policy, or they can conduct a policy review to ensure that your current policy is still right for you!
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