Quick Tip Tuesday - Life Insurance and Estate Taxes: What Families Should Know

So let's start with the with the why.

What problem does an eyelid solve, Dave?

Well.

It solves a surprise that catches a lot of families off guard.

I mean, most people assume that life insurance is always tax-free.

And while that's true that the death benefit is generally income tax-free to your beneficiaries, the catch is different.

The catch is if you personally own the policy when you pass away – The death benefit gets counted as part of your taxable estate.

So we're not talking about income taxes here.

We're talking about your taxable estate upon death.

So just for everybody, and Dave, for you, as you just said it, it's income tax-free, but not necessarily estate tax-free.

Exactly.

So now you're getting it.

So for a family with significant wealth, the distinguishing factor is huge.

So picture a large policy stacked on top of your home, your investments, chances are you're in a business or you've got long term investments that have really grown in value.

That death benefit could be the very thing that pushes your estate over the exemption line and triggers a huge estate tax bill.

So the tool designed to protect your family accidentally could create a tax problem for them in the future.

That would be really

rough if

that happened.

Yeah.

Yeah, exactly.

Exactly.

Okay.

So how does an islet fix that? Walk me through it.

Like I'm brand new to this.