How to potentially increase the wealth you leave your heirs

People born in the 1930s and 1940s enjoyed the many benefits of a robust economy when they entered the workforce, says Mark C. Pagni, ChFC, CLU, a Financial Consultant at AXA Advisors, LLC.

“They enjoyed solid wages and cradle-to-grave, employer-paid benefits including pension plans and health insurance plans,” Pagni says. “They also enjoyed strong government benefits like Social Security, and Medicare, both programs that are likely going to be reduced or postponed to later ages, for our young children or grandchildren.”

Today, the economic climate has changed dramatically. Many company benefits are being trimmed or discontinued, and pensions are becoming more and more uncommon. In the midst of these changes, legacy planning might make a real difference in the quality of life that our survivors enjoy someday.

Smart Business spoke with Pagni about the value of legacy planning and how to potentially increase the wealth you leave your heirs.

Who should be looking at legacy planning?

Your first concern should be to make sure that you have put away enough money through saving and investing to secure your own retirement and financial well-being.

One of the first steps is to identify extra money in your retirement and investment accounts, which you will likely never need. I refer to it as junk money. If that extra money isn’t there, continue your efforts to secure your own future before you worry about what you’ll be able to pass on to your heirs.

Once you have addressed your own retirement needs and you’re in a position to do some legacy planning, you will want to pay attention to how your assets will transfer at death. In order to provide a smooth transfer of wealth, you may need to do some basic estate transfer planning, using trusts and proper titling, to minimize delays and unnecessary tax consequences. The advice of a good estate attorney could make a lot of difference here.

How can life insurance be a good wealth transfer tool in the legacy planning process?

One of the simplest and safest ways to help ensure an inheritance for your heirs is to purchase life insurance, assuming you are insurable. Joint life insurance policies, for married couples, may provide a higher death benefit per dollar of premium, as compared to single life policies. Consider using unneeded assets to fund the premiums, such as the annual Required Minimum Distributions from IRAs or other pre-tax plans, or the interest and dividends from your other investments. Even just setting aside a half of one-percent of your liquid net worth each year may be a relatively pain-free way to better secure a meaningful inheritance for your family.

What are some of the potential benefits of using life insurance in legacy planning?

One potential benefit would be to better secure your financial legacy. Your net worth will be subject to market forces, and may go up and down in value over time. Life insurance, looked at as an asset rather than insurance, may provide portfolio stability for your heirs, through the predictable, contractually guaranteed, and generally income tax free death benefit. Guarantees are backed by the claims paying ability of the issuing company. Another potential benefit might be to indemnify your heirs for the income taxes that they will be responsible to pay, when you leave them with substantial IRA or other qualified plan funds. Although there are various settlement options available to IRA beneficiaries, those accounts will never escape eventual income taxation. The result of this strategy may be to significantly increase the net after tax inheritance received by the heirs.

Consider using life insurance if you are concerned that your estate value may be diminished by the need for long-term care. It could be used to restore your estate values that were spent on your long-term care, after your death. The odds of any of us needing long-term care someday, although significant, are not as certain as dying is.

*Mark Pagni offers securities through AXA Advisors, LLC (NY, NY 212-314-4600), member FINRA/SIPC. Annuity and insurance products offered through AXA Network, LLC. AXA Network conducts business in CA as AXA Network Insurance Agency of California, LLC, in UT as AXA Network Insurance Agency of Utah, LLC, in PR as AXA Network of Puerto Rico, Inc.

AXA Advisors and AXA Network do not offer tax or legal advice. You should consult with your professional tax and legal advisors regarding your particular circumstances. AGE 113200 (4/16) (Exp 3/18)

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