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Life as Property

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Term life insurance as property

Without the headaches of property

What comes to mind when you think of property?  Typically, it's a house or condo.  Your mind may quickly wander to leaky faucets or a roof that needs to be change.  Maybe, that's just me.  Any way, most people do not realize that the benefit of term life insurance can be thought of as property in the event of a person passing away and settling his/her  estate.  In fact, it's better on many levels.  Let's look at how term life insurance plans offers all the advantage owning property but without the leaky roof!

Property is usually thought of as real estate.  Property can in fact be anything that a person owns and has the right to use.  One of the biggest assets in today's world when a person passes away is his/her real estate.  Depending on their age, there may be a high net value (meaning the mortgage is paid off and home equities loans won't swallow the value of the house).  There are two issues.  First, loved ones may need to live in that house.  They can sell that property in order to generate cash but hopefully the market favors a seller.  There's no way to insure the timing of this so that's not a good bet.  If your loved ones do not have term life insurance protection, they may be forced to sell that property at a discount and move to a less desirable area.  This can impact such options as school quality and just plain quality of living.  Liquidating property or downsizing is not always the the easy or best approach.  The selling of real property can also take time and effort.  Even in a good market, it's a process...a process by the way that might cost an additional 6% to realtors in order to transact. 

The second big issue with liquidating or selling property is that unless it has been properly protected through pro-active estate planning, the property may be subject to taxes, debts, loans, and expenses.  Probate (the process of settling estate) is a nasty process as anyone you has been through it can attest to. 

So that's one kind of property...a common one that comes up when someone passes away.  What about term life insurance?  Combine all the benefits of real property without the pesky tenants or 6% real estate commission.  When a person passes away and they were responsible in having term life insurance protection for their family, the benefit is paid directly (depending on settlement options) to the term life beneficiary.  Let's say that a person has $500K of term life coverage.  $500K is a lot of money.  It's able to stay "a lot" of money because it avoids the nasty world of probate.  This benefit is not taxed. 

Keep in mind that most lump sum sources of income can be taxed at the highest rate depending on the amount.  This can be upwards of 50%.  That means the $500K of real property or cash might be $250K after the government takes it cut.  This is why estate planning is so important.  If you leave property to chance, you're inviting the government in with their tax wand.  Poof...disappeared.  Built into the life insurance policy is this immediate creation of an estate.    This "property" is immediately available.  Literally, the IRS looks at life insurance as property.  It has maintained the above mentioned benefits for decades and that is what makes term life insurance the best kind of property to own. 





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