Life Insurance Specialists


#6. Say "Goodbye" to Uncle Sam


Thank you for tuning into our blog series, The Top 6 Reasons Why Smart Business Owners Use Life Insurance. Our final benefit of the six, Say "Goodbye" to Uncle Sam rounds out the amazing number of benefits simply having a life insurance policy in place can do. 

#6. Say "Goodbye" to Uncle Sam

Some senior generation business owners wait until death to transfer all or most of their business interests to the junior generation. If the business owner has a taxable estate, life insurance can provide the recipients of the business with the cash necessary to pay estate taxes. With estate tax exemptions likely decreasing in coming years, many business owners and their families will face increased transfer tax liabilities.

Using life insurance to pay estate taxes is particularly useful for business owners because their equity interests cannot be readily liquidated. The junior generation receiving the business may also need life insurance to pay estate taxes.

Usually, the insurance policy will be owned by an ILIT, discussed above, so that the beneficiaries will receive the death proceeds both income and estate tax-free. In many cases, most of the business owner’s estate is tied up in the value of the business. Without an effective estate plan, including a business succession plan, the business may have to close or be liquidated to pay estate taxes. With the proper use of life insurance, a
business owner can provide the liquidity needed to pay any estate taxes due at death.

For example, an ILIT can be established for the purposes of owning a life insurance policy on the life of the business owner (or business owners, if married). The trustee of the trust is usually the intended beneficiary. At the owner’s death, the policy proceeds are payable to the trust which can then, at the direction of the trustee, be used to pay any applicable estate taxes.

Most successful business owners recognize the importance of using life insurance to protect them,
their families, and their companies. They use life insurance as a financial tool to solve many of the problems associated with maintaining and growing a successful company, as well as to accomplish retirement, succession, and estate planning objectives. There are many benefits to life insurance policies but our top 6 are critical. Read our blog series or download our ebook to learn about all six. Contact us to review your succession, estate, and life insurance plan

Back to Blog

Related Articles

#3. Accumulate Assets for Retirement

Part three in our blog series, Top 6 Reasons Why Smart Business Owners Use Life Insurance, covers...

#2. Protect an Owner's Family and Ensure Survival of the Business

The second blog in our series, Top 6 Reasons Why Smart Business Owners Use Life Insurance, talks...

5 Ways to Maximize the Value of Your Employees and Your Business in the Real Estate and Construction Industry

Retaining key staff – those crucial to your organization’s ongoing success, even survival – is a...