If you are passing an estate on to multiple beneficiaries, there may be hidden stresses behind distribution of family assets. Each heir may wish to inherit specific assets such as a house, car, land, collectibles or a business. These assets may not be easily divisible, may have fluctuating values, lack liquidity, or have potential tax liabilities. In many cases it is not feasible or desirable to liquidate or divide the assets for the sake of equality.

Depending on the family dynamics, these types of issues can often create tension among heirs. An estate equalization plan using life insurance may help. The goal of estate equalization is to balance the desires for specific bequests with the desire to maintain equitable distribution.

 

Case Study

Many businesses have responsibilities that not all heirs wish to take on. Often, children have other interests or have chosen different career paths.

A business owner may have a child who is involved in the business and wishes to take over after the owner’s death or retirement. They may also have another child who is not involved in the business at all. In this instance, life insurance may help the owner pass on the business while being fair to both children.

Example:

  • Jim and Marlis (both age 60) have a construction business valued at $3 million. They have other personal assets of $1 million.
  • They have two sons: Cory is involved in the business and would like to be the successor owner. Bryan has his own career and is not involved in the business, nor does he want to be involved.
  • Jim and Marlis would like to pass ownership of the business to Cory while being fair to Bryan.

The Solution:

  • Jim and Marlis, both Preferred NS:
    • Purchase and own a $2 million Survivorship Builder policy
    • Pay an annual premium of $18,500
    • Name Bryan as the beneficiary
  • After Jim and Marlis pass away, Bryan receives the $2 million death benefit from the life insurance policy. In addition, he receives his parents $1 million of non-business assets bequeathed through their will.

The Results:

  • Jim and Marlis continue to own their business until the second death.
  • They specifically bequeath the $3 million business solely to Cory through their will, allowing it to remain completely intact.
  • The brothers now inherit assets of equal value.

 

 

*** FOR PRODUCER INFORMATION AND REFERENCE ONLY. NOT FOR USE WITH THE PUBLIC.

 

Robert E. Chittick is CEO of the LHENetwork. He is also the founder and partner of LHENetwork, The Life and Health Experts, Canaan Financial Group and Canaan Marketing. He is a sales coach and trainer for insurance agents, financial advisors and planners since 2001. He can be reached at rchittick@cag-1.com.

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