6. DESARROLLO DEL PROYECTO
6.2 PASOS DE FOCALIZACIÒN
EQUIVALENT TO THE
I
EXPECTED ESTATE TAXI LIABI LITY
In this illustration, you \vill 11ote tl1at the pie rernains whole, \vhich n1eans that the wl1ole estate, unreduced b)' taxes, can be passed on to heirs. A nev,' pie, a life insurance policy, is created t1pon death of tl1e estate O\\-ner that \Vill i:>roduce the mone3• to pa.r· for estate taxes.
Doesn't it mal->:e sense? Wb3• tal<e the tax money from the estate when it can be sourced elsewhere at a cost mt1ch lower than the
tax liability? Why pay P 1 9,000,0<10 in estate tax for a
100
Million i1et estate, when you can pti)' only t!1e premiums for a
P19,000,000
life insurance policy? For the same reason, whypay
P1 5,000,000
in donor's tax orPS,000,000
in capital gainstax, when the same money ca.11 be i11vested and probably earn enough interest to pay the annual premittms of a life insttrance policy, tl1ereby saving you an<l your fa1nily tl1e \.vl1ole tax money?
W!LL BE DONE
ANGElO ,\1 CAil RE RA
At the beginning of this book, l em1Jl1asized the importance of protecting tl1e welfilre of the estate O\.vner in any estate plan. Protecting him ma�y tnean allowing l1in1 to retain control, possession aI1d e11JO)'Jnent of his properties, for as
long as necessary an<l tra11sferring them at the proper time. But taking this course of action would necessarily require tl1at the estate has enough liquidity to pay for tl1e estate tax
when the same f.:'llls due, T11is is where life insurance becomes an indispensable tool, an ideal solution - an instrument that delivers the right amount of 1noney at the right tin1e. Of course, this prest1 '11es that the estate O\.vner is still insurable. A person can be uninsurable by virtue of l1is age, l1ealth, or occupation. Lite i11sura11ce companies have different maxi1nu1n insurable ages, an)'\vhere from 65 to 75. But at these ages, one must be in gooJ health to be insurable, "vhich t1nfortunately is not usi1ally the case, giveh tl1e effects of all the cholesterol accumulated through the years.
This brings us to an i1nporta11 t point - the need to get life insurar.ce while you are :young, healthy a11d \vith a
considerably good an1oun · of cash at hand. Tl1at basically means TODAY - you·re young-er, l1ealthier and '.vith more capacity to earn income - ratl1er than
'rOMORROV\l
�-hen you shall be older and prC'babl.Y less healthy, factors tl1at 1nay either drive up yot1r pre11 .iums to j)rohibitive levels or make you completely uninsurable.It is always good to be al1eacl of your current need for life insurance, n1eaning having more insurance coverage than
S E-rTLEMENT
CHAPTElt.13
what you presently 11eed. Tl1at is because getti.1g covered now, "vhile young and hea1tl1y, mear1s a lower cost of coverage. Your need for life insurance 'vill grow as you advance in your profession or business a11<l will pr( ibably i11crease in leaps and bounds as your estate gro\vs. A11ticipating that tl1is would happe11 anyway, isn't it '.vise to take advantage of your young age, good l1ealth and relati.,.·e l11Jg·e income by covering even your growing needs of to1norro,Y?
If, on the other hand, you are 110 lo11ger insurable, other options can then be co11sidered, such as lifetime transfers. But then again, should this option l>e taken, you Wn.uld alv.•ays remember to l<eep some of yot1r }Jroperties to take care of your needs, as repeatedl3r etnphasized in this book:. It i� best though that a trusted attor11e3' or advisor be co11sulted \vhen transfer options are considered, to e11sure that all.legal angles are covered even as the \.VE'lfare of the estate ov.·ner and his \Vishes ru1d desires are taken into consideration.
OTH E R U S E S OF
LIFE INSURANCE
IN E STATE PLANNING
"Four things on earth are small, yet they are extremely wise: Ants are creatures of little strength, Yet they store up their food in the sumrner."
- Proverbs 30:24-25
By t11is ti1ne, )'OU would ha\."e lea1· ne<l t11at life insurance is an
important compone11t, if not a necessary part of any estate plan, especially where the estate owner inte11ds to retain control and , enjoyme11t of his properties. But pro·viding funds to pa:y fbr estate taxes is not the only use of life insurance i11 estate plan11ing. There are a number of otl1er apjJlicatio11s:
I . To Intentionally Enlarge an Existing Estate -We learned
in a previous chapte!" that a }Jer."lon transmits to 11is heirs at the precise 1noment of l1is death not only his properties and transmissible rights but also l1i.s obligations. Tl1us, even if a person accumulates several assets during his lifetime, these would benefit his family little if at the time of his death he also leaves bel1ind several unsettled obligations.
OTH ER USES OF LlFE INSURANCE IN ESTATE PLANNING
CHAPTER14
This is especially true '>vi th young entrepreneurs who usually rely on credit for their business.A.s
they build tl1eir wealth, they usually require help fro1n creclitors to opt::rate and grow their business. The problem i s when death stril{es prematurely. The family is usuall:v left witl1 an inheritance that is so diminished by obligatio11s - rnuch like the story of the father of John Gol{ongv.1ei.That story afters an important le-sson: tl1e need to ensure that, even as one builds '\-\'ealth. to secure the future of J1is children, such wealth does not fall short \vl1en the ti·�1e comes. This is a11other instance '>vl1ere life insurance can jJlay a role. Throt1gh life in.surance, OJle can intentionally enlarge an existing estate witl1out havi11g to l)uild one. If )'OU know t11at your obligations today "vould etlectively leave your family \vith little or notl1ing, or, if )'OU \\'ould li\{e to leave more \Vealth than \vhat your current estate could offer, then you can use l�fe insurance to create a new estate.
I \Vas given an interesting illustration of this by my mentor many years ago. Lil{en it, he said, to a man climbing up the stairs to reacl1 the
sth
floor. If l1e sLtffers a fatal heart attack on the second floor, he "vould not have made it to his goal. On the other l1and, by ridi11g an elevator and pressing the button for thes1h
floor; even if ht' suffers that�tacl{, that elevator would still bring him to his destination. By pressing that button, he would ha'\'e created the certai11ty that l1e would get to his goal. He "created" a floor bj' that stroke of a finger.W!LL
l\ E DONE ATTY. ANGELO /\\. CARRERAThis is exactly '\vhat life insurance does - by a stroke of a ·
pen, a ne\v estate wot1ld be crl•ated a11d with it, tl1e certai11ty:
tl1at v:ealth would be inl1erited by your heirs, regardless
of:':tl1e co11dition of your curre11t accou11t; a ne\v estate >vhich
would other>vise ha\-'e taker1 years to build.
2. To Equalize the Inheritance of Heirs -