Capital Transfer

Your Legacy -- Make Every Dollar Count

A strategy for maximizing the value of assets you leave for the next generation while minimizing the effects of taxation.

  • Do you have assets that you are not currently using for living expenses?
  • Do you plan to leave those assets to your beneficiaries?
  • Are you interested in a program that could help maximize that legacy and make every dollar count?

If you answered yes, Capital Transfer may be a good choice to help preserve your hard-earned assets for tomorrow. You’ve worked hard to build a comfortable living and take care of the people and organizations that mean most to you. Whether you wish to leave a nest egg to your grandchildren or support your church or a charitable organization, there is a way to maximize the amount your beneficiaries receive. The Capital Transfer program allows you to leverage your current assets into a larger legacy using life insurance with a guaranteed death benefit. With careful planning you can help en sure that you make every dollar count for your beneficiaries.

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How does Capital Transfer work?

Not all assets are taxed the same way. Some are great vehicles for accumulating wealth, but others are better for passing wealth to your beneficiaries. Capital Transfer is an allocation of funds from a current asset to a life insurance policy — which provides a death benefit — to help maximize the legacy.

Two Challenges – and Capital Transfer Solutions

  1. The Retirement Plan Tax Dilemma
    Traditional IRAs and qualified retirement plans — 401(k) s, profit sharing plans, etc. — are remarkably efficient accumulation vehicles. Untaxed dollars are used to fund the plan, and income taxes are deferred as long as the funds remain in the plan.

    These retirement plans become inefficient vehicles when funds are distributed at retirement. And at death, plan accumulations may be subject to double taxation — both income and transfer taxes. If you die with money in a qualified plan, income tax may be levied when funds are distributed to beneficiaries. And if your estate is large enough, transfer taxes — federal estate and state inheritance taxes — may also come into play.

    The Solution
    If you want to preserve your hard-earned assets to pass along to your beneficiaries, you need a strategy to help maximize the value of assets earmarked for your beneficiaries and minimize the effects of taxation. Preserving your assets — and your legacy — is possible with a Capital Transfer Strategy that turns an asset subject to taxation into an asset that is more tax-efficient -- a life insurance policy that passes income tax-free to your beneficiaries.

  2. Required Minimum Distribution Dilemma
    Income and transfer taxes are not your only concern. After you reach age 70½, annual distributions must also be taken from traditional IRAs and most qualified retirement plans. So, whether you actually need your nest egg or not, the IRS requires that you take part of the account each year. This is called a required minimum distribution or RMD. Failure to take the required minimum distribution — whether you need the income or not — means your distribution assets will be taxed again. This time a whopping 50 percent penalty tax is levied on any amount you were required to withdraw but did not.

    You don’t need the money, but you must take the distribution that is specified by the IRS and pay current income taxes on it. If you don’t take the distribution you pay a punitive tax penalty.

    The Solution
    There is a way to use the required minimum distribution to help maximize the inheritance you leave to beneficiaries. The Capital Transfer Strategy lets you place your retirement dollars in one of the most tax-efficient vehicles for transferring assets — a life insurance policy. By using the after-tax amount of your required minimum distribution to purchase life insurance, you help maximize your legacy and avoid transfer taxes. Properly designed and funded, life insur¬ance passes tax-free to beneficiaries — helping to preserve the legacy you intended for them to enjoy.

Preserve Your Legacy

As you can see, taxes may dramatically shrink your legacy. Capital Transfer can help stop the drain on your assets. The name says it all because this planning tool involves transferring wealth from one asset to another. The Capital Transfer Strategy lets you replace an inefficient tax consequence asset with an asset that provides a favorable after-tax result.

Take the Next Step

If you think Capital Transfer is the right strategy for your plans, it’s important to work closely with your financial professional. Contact your advisor today to find out how this planning solution can help you leverage your assets for the next generation.

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Updated 04/10/2015