Leveraging Whole Life to Pass on Wealth
When it comes to your financial legacy, it’s not how much you leave behind, but how much your loved ones receive.
Like it or not, you have to pay tax on your right to transfer property when you die. If the value of your estate is below the exemption threshold — currently $12.06 million, though this amount can vary by state — then you’re not required to file a federal estate tax return. If it’s higher, you may have to fulfill filing requirements and pay a 40% estate tax on every dollar in excess of the exemption amount.* It’s probably worth mentioning: In 2026, the basis exclusion amount (BEA) is due to revert to its pre-2018 level of $5 million, as adjusted for inflation.
Transferring wealth using whole life
For many high-net-worth individuals, the exemption threshold is lower than the size of their estate. Without a wealth transfer strategy, their heirs would have to pay estate taxes out-of-pocket, creating more stress during an already difficult time.
Although there isn’t a one-size-fits-all approach to passing on your assets, life insurance is typically used as part of the strategy in the following ways:
- Transferring benefits. Life insurance can be structured so that the death benefit goes directly to your heirs income tax free. This allows you to transfer more of your wealth without increasing your estate — and the potential tax liability.
- Gifting premiums. You could gift premiums into the policy to take advantage of annual exemption limits.
- Funding estate taxes. Your heirs can use the policy death benefit to pay their estate tax bill to avoid cash flow concerns.
While a will or a trust can preserve and distribute your assets, a whole life policy is not just an estate planning tool — it can also be used as a wealth-building vehicle.
For more on how you can use life insurance as part of your overall wealth transfer strategy, talk to your financial professional.
*Source: Kiplinger, Estate Tax Exemption Amount Goes Up for 2022, Nov. 10, 2021
Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.
All whole life insurance policy guarantees are subject to the timely payment of all required premiums and the claims paying ability of the issuing insurance company. Policy loans and withdrawals affect the guarantees by reducing the policy’s death benefit and cash values.
Pub11561 2022-137245 Exp. 4/24