life insurance
I have a family member that the adult kids got $50,000 inheritance and the parents had them put it into a life insurance policy to avoid taxes. I have never heard of anything like this. I was told that this is how rich people avoid paying taxes. Your input please.
Terry Says
The kids get the inheritance tax-free. They can invest it in many ways. If they are working, perhaps they could open a Roth IRA and contribute up to $7,000 a year — and it will grow tax free there.
If they NEED life insurance coverage –to protect their family — they can put them money into a life insurance policy. And depending on the policy –and the internal costs — they could build up tax-free cash value.
But if they don’t need the coverage, it’s ridiculous to pay the mortality charges for the life insurance. Those charges can eat up the cash value — and if they get sold a “universal” life policy, they could find out that the premiums eat up the cash value!
Of course, they won’t figure this out until years down the road when it’s too late! Life insurance is not a game for amateurs!
