WHOLE LIFE INSURANCE AS AN ALTERNATIVE INVESTMENT
If only we had a crystal ball. We would know the best time to put money in the stock market, when interest rates will rise, when death or injury would occur; or on a lighter note, pick next week’s winning lottery numbers. Unfortunately, there isn’t such a thing as a crystal ball. However there is the ability to help people look at their finances differently and perhaps look at alternative investment options based on our current economic environment.
Recently there has been an opportunity to make use of life insurance as an alternative asset class. This is an excellent strategy for business owners who accumulate retained earnings within their corporations. This type of planning is particularly attractive to individuals, who would be characterized as having a low risk tolerance and don’t want to risk their capital; who are interested in increasing the value of their estate that would pass on to their children. The meaningful benefits of whole life insurance are:
• The ability to increase your rate of return significantly on cash, near cash and a portion of your fixed income portfolio over a long period of time;
• The ability to access your equity in a tax effective manner if the invested capital is required for other investment opportunities to provide you with a future income;
• Significant downside protection in the event of death with immediate liquidity that can be used to finance estate tax liabilities, provide funds for charitable endeavours or equalize estate assets for your children and grandchildren;
• The ability to create a significant capital dividend account, which would enable your heirs to access corporate capital in a tax-free manner in the future.
In conclusion, the strategy of using whole life insurance as an alternative investment involves repositioning a portion of corporate dollars into a permanent life insurance contract. Structured correctly the strategy minimizes the capital gains triggered upon death and takes advantage of the Capital Dividend Account to pay a tax-free dividend to the shareholders/beneficiaries. Funds contributed to the strategy grow free from tax and are accessible during one’s lifetime.
Jaymie Bongard BIO Involved in the financial industry since the late 1970s, Jaymie Bongard first worked for the Prudential Assurance Company. In ‘95 he co-founded Independent Financial Concepts Group. As a member of Top of the Table, a group in which less than 1% of financial planning professionals worldwide meet the requirements, he focuses on tax advantaged wealth accumulation & preservation strategies.