Could You Gift Life Insurance like Peyton Manning?

December 14, 2018

Gift Insurance like Petyon Manning

 

Many people have seen the witty commercials featuring previous star quarterback Peyton Manning of Superbowl fame, but have you actually considered gifting insurance products to loved ones? Of course, it is not a glamourous gift, but as a secondary choice for family members, it could be the one gift that keeps on giving. Life insurance also provides a modicum of wealth protection and wealth preservation and is an active strategy you should consider.

Better When They’re Young

As a new parent or grandparent, you are sure to buy plenty of gifts for your new child or grandchild during the holidays or for their birthdays. Typically, these gifts will be wonderful, and the child will enjoy them for a few years. However, this is also the perfect time to buy a gift not many people think about this early: insurance policies.

Between the ages of zero to five, is the perfect time to start gifting insurance policies for a couple different reasons. First, as a practical consideration, children this young will ‘not know what they are missing’ if they receive a policy, and you could always provide a small toy with the insurance envelope as well. Secondly, many permanent life insurance policies grow substantially the longer they are held and cascading life insurance policies provide a great way for grandparents to offer a wealth transfer option without incurring taxes or probate fees.

Term Life Policies?

There is professional debate on the value of gifting term life policies for children. On one side there is an argument that if you insure your child early, it protects them from higher premiums and insurability later if they were to contract an illness. The counterargument here is that if there are family history health issues these have to be disclosed before signing a policy and would incur potentially higher premiums in any case. Further, there is an argument that the costs of a funeral are not sufficient to warrant a term life policy. It would be wise to talk to a licensed insurance professional before making a term life policy purchase for children.

Permanent Life Policies

Whole life or universal life policies are a good vehicle for affluent clients that have maxed out their other ways to contribute to a tax-deferred strategy. In this way, it provides another avenue to diversify your investments, provide a way to transfer wealth to a younger generation tax-free, and even lock away money in a guaranteed investment (provided the policy has a guarantee) as part of your wealth preservation strategy.

RESPs and Trusts

An alternate option could be gifting start up money for an RESP or Trust for your child or grandchild. RESPs provide a great registered and tax-deferred option for parents to contribute to your child’s future education as well as receive a government grant from the program. The lifetime contribution limit is $50,000 and the lifetime grant maximum is $7,200. A testamentary or inter-vivos trust may be another option to pass wealth from one generation to another. An incentive trust allows you to stipulate rewards based on certain actions as well.

Be sure to talk to a licensed insurance professional and Investment Advisor to consider all your options before making a decision.

Feel free to contact Steve McBride, Investment Advisor, Echelon Wealth Partners regarding any questions you may have on this content.

 

Disclaimers

This blog is solely the work of Steve McBride for the private information of his clients. Although this author is a registered Investment Advisor with Echelon Wealth Partners Inc. (“Echelon”) this is not an official publication of Echelon, and this author is not an Echelon research analyst. The views (including any recommendations) expressed in this newsletter are those of this author alone, and they have not been approved by, and are not necessarily those of, Echelon.

Echelon Wealth Partners Inc. is a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund.

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The opinions expressed in this report are the opinions of this author and readers should not assume they reflect the opinions or recommendations of Echelon Wealth Partners Inc. or its affiliates. Assumptions, opinions and estimates constitute this author’s judgment as of the date of this material and are subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Past performance is not indicative of future results.

These estimates and expectations will prove to have been correct, and actual outcomes and results may differ materially from what is expressed, implied or projected in such forward-looking statements.

These estimates and expectations will prove to have been correct, and actual outcomes and results may differ materially from what is expressed, implied or projected in such forward-looking statements. Echelon Wealth Partners Inc., its divisions, subsidiaries, and affiliates, do not provide any income tax advice and does not supervise or review any income tax returns. Please consult your accountant.