Client Success Stories – Dave & Karen
Client Information: Dave (age 68), Karen (age 67)
Client Needs/Wants: Minimize taxes at death and transfer assets to the next generation in a way that is effective tax-wise.
Dave & Karen are a recently-retired, married couple. Based on their health status, they have a life expectancy of 84 and 87, respectively. They both have substantial retirement savings and pensions, so income throughout retirement is not a concern for them. They have 2 adult children and 2 grandchildren; their children are well-established so Dave & Karen are interested in helping out the grandchildren for university or deposit on a home in the future. A concern for Dave & Karen is the fact they could be faced with a substantial tax bill on death. They asked me to accomplish two things for them: limit the tax their estates will have to pay and find tax-effective ways to transfer wealth to their grandchildren.
The first solution we implemented with Dave & Karen was to move some of their non-registered investments into Segregated Funds, which allow named beneficiaries and bypassing of probate on death. This helps structure their estates in a more tax-effective manner and allows for a quicker distribution of assets.
Secondly, when it came to their objective of passing on some of their wealth to their grandchildren, we set up a solution that is perfectly suited for a grandparent-grandchild legacy wish. That solution is a permanent insurance policy, owned by Dave & Karen, with the lives insured being the grandchildren. This is a perfect strategy for their objectives for a number of reasons:
- Dave & Karen can deposit money into the policies with no immediate tax implications.
- The grandchildren gain future access to long-term assets that can be put towards university education, down payment on a home, a vehicle, or other financial needs.
- Although the benefit is for the grandchildren, Dave & Karen remain in control of the asset.
- The grandchildren have locked in their insurability at a young age, regardless of what may happen with their health in the future.
Dave & Karen came to First Oak in a good situation financially, but they had key objectives they wanted to accomplish, and we were able to do just that. Legacy-building is a profound concept and knowing they are setting up their grandchildren for the totality of their lives, all while lowering their eventual tax bill, was a concept that Dave & Karen could not have been happier with.
DISCLAIMER: client names have been changed to protect their identity.