Often times when we talk to clients they will be able to get all of the benefits that they are seeking, but they simply need to move around the money on their model. For example, they want to optimize their life insurance protection, but don’t have a lot of additional money to spend. We can often find lost dollars that can be moved towards the protection with no additional out of pocket costs.
One of our clients recently was in need of additional life insurance protection, but didn’t want to change their monthly outlay. On top of that, they were very concerned about asset protection. They had been sued in the past and wanted to make sure that they were as protected as they possibly could be. We recommended that they visit with a good estate planning/asset protection attorney, but also to move part of a non exempt asset into life insurance. They had over 200,000 in a money market and we suggested that they simply move a small amount of that money each month into a whole life insurance policy. Not only was it going to purchase them permanent death benefit, but the policy would be overfunded. Overfunding the policy would create immediate cash value and money that was into an exempt asset from creditors. Obviously, if they were to be sued that 200k in the money market would be susceptible. I asked them why they had that much in a money market and they said they wanted to have good liquidity. Liquidity is a great thing and we explained that they would have that inside the life insurance cash value too.
The world today can be very litigious and the risk of getting sued is high. It is important to work with your financial advisors to create as much of a bulletproof plan as you can. While that would be the goal, it is very difficult to avoid all possible risk.
One necessity of this is to have the proper insurance planning. Two products that are protected from creditors are cash value life insurance and annuities. Often these products are used by physicians or others professionals to protect there assets with malpractice and personal liability being such a big issue in today’s marketplace. Premium financing has become very popular using insurance and annuities.
Not only do you get the creditor protection with the products but you also get tax advantages with each one. With Annuities the growth is tax deferred and with life insurance the growth in the cash value can be accessed tax free if used correctly. Annuities are not necessarily a good fit for everybody, but with the right application they can be very effective. To read more about cash value life insurance and annuities you can read about it on www.massmutual.com.
If you haven’t established a risk mitigation plan, you may want to speak with your financial advisors and take a look at how these products and others might be added to your plan.
