Insurance for the Upper Class American

Insurance for the upper class American does more than simply protect the standard of living for wealthy families. It protects businesses, charities, endowments and any number of interests and causes that employ large numbers of people and are supported by the wealthy. Life insurance purchased by the wealthy often protects a number of entities that aren't immediately obvious. While upper class Americans are more likely to have access to professional money managers and financial advisors, they are also more likely to have complicated financial arrangements such as trusts.

Upon the death of an individual, assets can only be transferred to two places: Beneficiaries and the government. The purpose of life insurance for the upper class, as it should be for all social classes, is to retain as much as possible for the beneficiaries. A life insurance policy for the upper class American does just that. It protects the assets that are passed from one generation to the next.

» Get Top Life Insurance Quotes Now

Permanent Life Insurance for the Upper Class American

Permanent life insurance is the typical choice for upper class Americans. Permanent insurance has two parts: The death benefit that is paid to the beneficiary upon the death of the policyholder and a cash-building investment account. The two types of permanent insurance are whole life and universal life. Both of these can further be variable, meaning that the returns paid on the investment account fluctuate with market conditions. As upper class Americans often have more disposable income than other classes, they can therefore take additional investment risks.

As upper class Americans are almost always in the highest possible tax bracket, both on the federal and state level, the advantageous tax treatment of life insurance policies is appealing. Not only do the earnings on a permanent life insurance policy grow tax deferred, the death benefit is almost always paid free of federal and state tax. For the wealthy, this can provide additional diversification of assets.

While a number of permanent life insurance policies are sold to upper class Americans to protect the financial interests of a family member, a charity can also be named as the beneficiary. Organizations such as The American Cancer Society, The American Heart Association and Special Olympics have charitable giving programs. In uncertain economic times, were it not for charitable life insurance programs, surely some of these organizations would not be able to continue with their work in the same way. Further, hospitals, libraries, universities and community centers often benefit from the permanent life policies of the upper class.

Insurance Policies and Upper Class Business Owners

Successful upper class business owners find many advantages to life insurance policies. Companies owned by upper class Americans that cannot provide senior executives with cash bonuses, either by law or because the tax structure of the corporation forbids it, can give employees life insurance policies.

A whole life insurance policy owned by a wealthy business owner can also name a business partner as the beneficiary. This is especially helpful if there are only two or three owners of the business. If the deceased was the "rainmaker" or if clients did business with the firm because of him or her, the death benefit can allow the remaining partners to close the business in an orderly fashion.

A key man life insurance policy can also be used in this way. Rather than having to liquidate the assets of the business or dismiss employees immediately, the death benefit can provide enough operating cash for several months or a year or more until a buyer can be found. It could also allow for surviving partners to buy out the deceased's share of the business. In doing so, the family of the deceased will have gained from the sale of the shares, rather than having lost the business because no insurance policy was in place.

Estate Planning and Insurance for the Upper Class

Permanent life insurance for the upper class is very often used to pass wealth from one generation to the next. Due to ever-changing tax laws that in some years taxes a portion of an inheritance and in some years does not, a life insurance policy can be used to pay those taxes. In most cases, the proceeds paid to the beneficiary are not taxed. Therefore, a wealthy married couple can each have a whole life or other permanent life policy that names a child or children as beneficiary. The death benefit can then be used to pay the inheritance tax that would be due on assets such as a home or property.

The children of upper class Americans often face extraordinarily high tax bills upon the death of a parent, particularly in families where wealth has accumulated and has been passed from generation to generation.

Upper class Americans should always make sure they discuss both their insurance and their investment needs with a qualified tax or financial planner. If the insurance policy is not set up correctly, taxes can be due. The policy must name an individual, such as a child or grandchild, or a specific charity as the beneficiary, not the estate. If the estate is named, the death benefit will be paid into the estate and it will enter into probate with the balance of the estate. This can create significant financial problems if bills such as property tax or homeowner's insurance are due before the estate is settled.

Provided a death does not occur under suspicious circumstances, the death benefit is paid to the beneficiary immediately. This allows him or her to pay the deceased's final expenses such as funeral and burial costs, credit card bills and any other debt that would come out of the estate. It also prevents the surviving family members from having to sell other assets such as common and preferred shares of stock, bonds, including those issued by corporations, municipalities and the United States Treasury Department. The ability to retain wealth following a death is just one of the ways upper class Americans are able to pass wealth down through several generations.

To find the best life insurance products request a free, comprehensive quote comparision. Secure your future today, Get Started Now.