MKA Executive Planners Blog

Summary

The purpose of this article is to discuss the “living benefit” aspect of life insurance.  By “living benefits” I mean its use as an alternative, non-correlated, investment component of an overall investment portfolio.  My premise is that life insurance may provide a greater total lifetime return with less market risk than a portfolio that does not include life insurance, with particular emphasis on its use by Dynasty Trusts.

The Obama Administration recently released its federal budget for fiscal year 2016 proposing several tax law changes, which, if enacted, could significantly increase your federal income, capital gains and/or estate tax exposure. Although Congress may not take action on these proposals, they may provide some insight into potential areas of consideration for future tax reform legislation. Some of the more notable proposals include:

Many foreign individuals choose to invest in the United States for a variety of good reasons such as to provide for family living here, to purchase a second home, or to take advantage of the relative security of the U.S. economic system.  Those non-citizens, whether they are classified as “non-resident aliens” or “resident aliens,” face a complex set of rules based on tax codes and international treaties for income and wealth transfers.

Estates and trusts will be subject to a surtax of 3.8% on “Net Investment Income” if: (1) they have” Net Investment Income” and (2) (a) “Modified Adjusted Gross Income” that exceeds (b) a “Threshold Amount” ($11,950 for 2013).[1]

Feeling confused?  You’re not the only one.  Between the income and payroll tax increases in Obamacare and the fiscal cliff parachute, it is hard to tell what is happening - even if you have a program identifying the players.