Despite the fact that the U.S. President Donald Trump has signed one of the biggest tax cuts in history, the rich will not give up on their hopes of buying lots of life insurance. Here are some of the reasons why the rich like owning tons of life insurance.
To protect their assets from tax
Under the law, wealthy people who are no more are expected to pay taxes equivalent 40-50% of their assets if they are worth more than $10 million. The heirs of the rich are expected to pay this liability by selling off or liquidating the assets. Many affluent individuals don’t want that. To prevent this ugly situation, the wealthy invest in life insurance, using their death benefits to pay their taxes when they are no more.
To pay funeral and medical expenses
All rich people are very provident. And they don’t want their loved ones to worry about settling their medical debts or paying for their funeral expenses, which may run up to thousands, if not even millions, of dollars.
To cover other debts
It’s not uncommon see a wealthy person without any modicum of debts. With life insurance, the rich can use their death benefits to pay their personal debts and other business debts.
To distribute wealth equally to heirs
In a word, life insurance offers the rich the leverage to distribute their wealth equally among their heirs. For instance, an affluent person with two heirs can decide to give the first child an asset worth $300 million and the second child a life insurance policy worth the same amount.
To donate to charity
The wealthy want their name to be etched in the sand of time. Life insurance helps them to achieve this in many ways. They could decide to give all their death benefits to the charity. They could even donate a life insurance policy to the charity. That way, their legacy is well-protected.