Since her early twenties, Danica Patrick has driven a racecar for a living. She is the most successful woman in the history of American racing and became the first female NASCAR driver to win a NASCAR Sprint Cup Series. It’s a risky profession and she’s chosen to manage the risk, in part, with life insurance.
The decision to invest in protection came naturally for Danica because her parents were proponents. Each had lost their father during childhood and witnessed the financial strain it put on their families. Danica didn’t want to leave people with bills they can’t pay for! Grieving the loss of a loved one is hard enough. Danica felt that life insurance would allow the people she loves to process loss without adding financial stress. She can use the death benefit for payment of final expenses, repayment of debt and mortgages, funding the replacement of household duties or replacing loss of income.
While at the beginning of her career, Danica needed life insurance. Today she still wants it, even though she no longer needs it. For those similar to Danica, who have sufficient personal assets, you may wonder if you need life insurance at all.
Here are a few reasons you may want to consider life insurance:
1. Transfer Assets Tax-Free:
When life insurance pays out upon your death, your beneficiaries will receive both the face value of the policy and the accumulating investments tax-free. If you were growing those investments outside of an insurance policy, there will be tax on that growth upon your death (when someone other than your spouse inherits the assets). Life insurance can eliminate that tax.
2. Equalize Your Estate for Heirs:
What are you going to leave the kids when you’re gone? Are you leaving assets of equal value to each of them? If you’d like to treat them equally but are leaving certain assets of value to one and not the other, life insurance can be used to provide cash to equalize things.
3. Enable Tax-Free Withdrawals from Your Corporation:
If your company owns and is the beneficiary of a life insurance on your life, your company will receive a tax-free payment when you die. These proceeds will increase something called the “capital dividend account” of the company. This will allow tax-free dividends to the surviving shareholders.
If you want to understand more about life insurance, please feel free to drop us a message here.
Jeff Devlin | Certified Financial Planner, Director
E & OE