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UK Inheritance Tax Planning
February 12, 2021

Three Ways To Fund A Legacy

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Amongst the most common motives for creating an estate plan is to leave a legacy behind for those you love. And it’s understandable to want to leave a little part of your estate behind for you children, grandchildren or anyone you love to enjoy. There are a number of different ways you can leave a meaningful legacy behind and these are often tax benefits.

In this blog, we shall be exploring three different ways that can help you fund a legacy, in a way that suits you and those you love the best.

1. Beneficiary IRA

First of all, what is a Beneficiary IRA? This is an account that is opened when an individual inherits an IRA. Both traditional and Roth IRA’s can allow for multiple beneficiaries. Once the estate owner has passed, the IRA is distributed into separate accounts for each beneficiary. The beneficiary will then have 5 years to either take the money out of that account or to transfer it into an inherited IRA.

2. Second to Die Insurance

Survivorship life insurance is commonly used by couples or spouses.  This type of insurance doesn’t pay out until the second death and for this reason, it is often known as “second-to-die” insurance. When one of the insured passes away, no benefit is paid. Nonetheless, to keep the insurance in force, the survivor must make the scheduled payments each month. Survivorship life insurance has very specific purposes and in some cases, it may be used to pay estate taxes or to leave a legacy. Since survivorship life insurance doesn’t pay out until the second death, it can provide a bigger death benefit than two individual policies, therefore making it an extremely effective estate planning tool.

The required minimum distributions come into force at the age of 72 years and increases each year as the person ages. At this age, many retirees already have their income stream set up, therefore they don’t need extra money to live on. Many people decide to reinvest this money, but what a lot of people don’t know is that using the required minimum distributions to pay the survivorship insurance premium can help to create a legacy that doesn’t depend on the proceeds of the estate. This is a huge benefit to retirees as it gives them the opportunity to spend their hard-earned savings on things that are important to them, whilst having peace of mind that the legacy they leave behind will benefit their loves ones.

3. Naming a Child as Beneficiary to an Annuity

Annuities are primarily used to in order to secure a steady cash flow during your retirement. But what happens to this when you’re no longer with us? The beneficiary set up process will allow you to name a child as a beneficiary, who will then receive an income stream from annuity payments upon your death. It is important to take note of the fact minor children cannot legally own property in their name. How to get around this? Designate a custodian as the beneficiary for benefit under the minor under the Uniform Transfer to Minors Act.

These three strategies don’t just depend on you setting aside part of your retirement savings and have been shared with you, so you can enjoy your golden years as much as possible whilst maintaining the lifestyle you have chosen.

Here at Skybound, we can help you create an estate plan benefiting you and most importantly your beneficiaries. Why not book an appointment with one of our experienced financial planners today, to set your plans in motion.

Written By

Information presented is for educational purposes only and does not intend to make an offeror solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.

Beacon Global Advisor Network LLC is a Registered Investment Adviser based in United States.  Registration with the Securities and Exchange Commission (SEC) does not imply a certain level of skill or training and does not imply the SEC endorses or approves of the services and advice offered through Beacon Global Advisor Network, LLC.

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