Blog Tag: wealth management
With all the noise in Washington, many people ignore the chatter and only pay attention once something becomes law. When it comes to estate taxes, however, it’s time to listen up. Today’s higher estate and gift tax exemption ($11.58 million per individual for 2020) will become a thing of the past. Under current law, the exemption will automatically sunset on January 1, 2026, shrinking the amount to $5 million (adjusted for inflation). Worse yet, depending on the 2020 election, Congress may even vote to reduce the exemption further and sooner.
On a nationally syndicated radio program, a caller asked a financial expert the following question: “My wife and I recently retired. We are trying to decide if there’s any reason for us to keep our term life insurance after retirement. What is your recommendation?" The answer was, “No. Drop the policies. There is never a need for life insurance once you retire."
Life insurance can enjoy favorable treatment under federal tax law. When structured properly, beneficiaries can receive death proceeds 100% tax-free, even passing free of probate and federal estate taxes. Furthermore, cash values can grow tax-free within the policy, and tax-free loans can be taken against the cash values. But favorable life insurance taxation isn’t guaranteed. When policies are structured improperly there can be significant consequences.
Are you considering surrendering an annuity contract or purchasing a new one? Annuities have been the brunt of considerable criticism lately and consumers are getting mixed signals. There are TV commercials that joke that death is a better option than purchasing an annuity, but the fact is over $200 billion was deposited into annuity contracts in 2017. So who’s right? Is there a middle ground where sometimes annuities make sense while other times they don’t?