3 ways you can easily make a multi-million dollar mistake

Scenario #1

There’s 3 business partners.

They have a company worth $6,000,000 and they are 1/3 owners each.

For what feels like forever, the discussion around a buy sell agreement and getting life insurance on each of them was discussed.

The insurance would guarantee that if a partner passed away, there was enough money to buy out the deceased partners’ shares and the remaining two partners would now be 50/50 owners.

Without this insurance, if a partner died, how would you come up with $2,000,000?

Loans? Deplete the corporate bank account? Re-mortgage against your house? Would you be unable to give the family of your deceased partner the value they deserve?

These partners could decide on getting term life insurance, permanent life insurance or a combination of both, depending on their cash flow and how much they want to contribute to insurance.

The risk isn’t which policy you should get or if you are overspending on a policy.

The risk is not having it at all.

Scenario #2

There is a couple worth $5,000,000 now and its projected they will be worth at least $8,000,000 when they pass away.

They have accumulated more assets and money in their life time then they will spend.

They have properties, investments and a business.

They have two options:

1) Do nothing and when they both pass away, lose approximately 30-40% of their net worth due to taxes.

2) Contribute some of the money they will never spend in their lifetime to a permanent life insurance policy. 

Why would you do #2?

The life insurance policy will pay for the taxes you owe, with money you weren’t going to spend anyways.

Permanent life insurance isn’t a lost expense. It comes with an investment, called the cash value, that grows tax free. So if you ever need some of this money down the road, its there.

There is also a huge benefit to their corporation. They will get a capital dividend account credit from the life insurance, allowing them to remove cash, real estate and investments tax-free from their corporation to their estate and family.

Imagine being worth $8,000,000 and losing millions the moment you pass away because you didn’t take one simple step. Your net worth can easily drop 30-40% because of lack of planning.

Now imagine being worth $8,000,000 and you purchased a life insurance policy so your net worth stays the same, Plus, you can remove some assets tax-free from your corporation.

Problem solved.

Scenario #3

There is a couple that has 5 rental properties.

They have more than enough rental income coming in on a monthly basis.

The money is just accumulating in cash in their bank account.

The properties have risen in value over the years and will most likely climb in value as the years go on.

They will of course owe capital gains on the properties. So what can they do?

Well, they could sell 2 of their properties to keep the remaining 3.

They could re-mortgage against all the properties and hope there is enough money to pay the taxes and they’ll get approved for such a loan.

Or, what if they contributed some of the rental income to a life insurance policy?

They could have their renters paying for their life insurance policy.

Down the road, they could use the investment inside the life insurance policy to purchase an additional property. Plus the life insurance will pay for the capital gains allowing them to keep all 5 properties.

The ironic thing is this….without life insurance, they will lose 2 properties to keep 3.

But with life insurance, they can guarantee keeping all 5 with a potential of purchasing a 6th property.

Problem solved.

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