Do you know what happens to your assets when you pass away?
I’ll give you a hint, taxes, taxes, and more taxes!
Estate planning is the process of planning the transition of your assets to your children and grandchildren after your death.
Of all considerations, one of the most complex is taxation.
Let’s look at an example: The Smiths, successful real estate investors
The Smiths, both 50, in good health, with three young-adult children, had built a lucrative portfolio of investment properties.
Both Mr. and Mrs. Smith were on the path to a very comfortable retirement but were expressing concern about leaving their portfolio of 5 rental properties and family cottage to their children.
Their children were very interested in continuing the family’s real estate investment legacy and were not interested in liquidating the current portfolio to cover the eventual taxes at their parent’s deaths.
Based on conservative projections, the family was SHOCKED to learn that the predicted tax bill on the current portfolio would exceed their liquid assets by $3.4 to 5.9 MILLION.
They needed a plan!
There were two main strategies they could employ:
- Save and invest to cover the anticipated tax costs
- Utilize life insurance to cover the anticipated tax costs
But wait, what if they could do both?
We devised the following strategy:
- We purchased a joint, last to die, participating whole life insurance policy
- By combining both Mr. and Mrs. Smith’s lives into one policy we were able to drop their “insurable age” to that of a 43 year old
- Fund the annual premiums through annual savings
- Immediately borrow against the Cash Value of the policy to fund a re-investment into a stock portfolio
This solution led to several beneﬁts including:
- The ability to utilize the stock portfolio to increase retirement income
- A projected TAX-FREE death beneﬁt of $3.4 million to cover estate related taxes
Overall, the family was given the peace of mind to continue to maintain and even build their real estate empire for generations to come.
David Terk, Software Engineer and Investor
At the Campanella Group we help clients like the Smiths every day. We are dedicated to helping our clients forge the best ﬁnancial path for their families.
Are you ready to take a step forward and secure a lucrative ﬁnancial future for yourself and your family? We are always ready to speak to ambitious entrepreneurs and investors looking for an edge.
Feel free to contact us for a zero-cost, 30-minute, online meeting where we can get to know you and determine if we can help you pave a path to ﬁnancial success.