A Santa Clarita financial advisor is weighing in on why he believes your life insurance policy should be the inheritance you leave behind for your kids instead of a retirement account like an IRA or 401(k).

Arif Halaby, a Certified Estate Planner and president/CEO of Total Financial Solutions, noted that because retirement accounts are typically pre-tax savings, that means the person who inherits these funds has to pay taxes on the entire amount, leaving them with a fraction of what they started with. In contrast, a life insurance policy is usually tax-free, under current law.

“Wealthy people say, … ‘I’m going to give my kids life insurance,’” Halaby said. “Why? Because it’s tax free — they receive it without any income (tax), estate tax, if it’s done right… If it’s done through a retirement account it will be taxed, sometimes at a really high rate too.”

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Jeff Girard, Halaby’s co-host on “Total Financial Solutions Safer Money Hour” on KHTS AM-1220, added that retirees often don’t spend most of the money they’ve saved for retirement because they’re afraid there won’t be any funds left to pass on to their children, but that they may actually be better off spending it themselves.

“(They) say, ‘I don’t want to spend that money because I want to make sure I leave my kids better off than I ever was,’” Girard explained. “(But) for every dollar that you leave in a pre-tax account like a 401(k) or a retirement account, you can count on not 100 percent of that going to them — maybe 60, 70 percent going to your kids.”

However, Girard noted that with most life insurance policies, you may actually leave your kids $10, $15, even $20 for every dollar that you put into it.

“Life insurance as a transfer of wealth gets around the problems that you can encounter with your 401(k) or your deferred comp or your TSA, your IRA,” Halaby said. “If you have a choice, you may want to consider using life insurance as a way to … fill the gap for that.”

This strategy of wealth transfer can not only allow you to take the trip you’ve always dreamed of or buy the RV you’ve wanted for years, it leaves your children with even more money without being forced to give a large portion to the government in the form of taxes.

“When you’re looking at taking care of you and your family, there are tools and mechanisms … to kind of transfer wealth to protect our families,” Halaby said. “There’s a reason that wealthy people use life insurance policies — it’s because they understand them.”

Total Financial Solutions offers assistance with preparing for retirement and financial planning in Santa Clarita and the surrounding valleys. Santa Clarita financial advisor Arif Halaby, a Certified Estate Planner, and Total Financial Solutions staff work with people of all ages, helping them protect, grow and preserve their assets through an individualized approach. As a well-known financial planner, Arif Halaby is also the host of “Total Financial Solutions Safer Money Hour” on KHTS AM-1220. Launched in 2004, the show offers listeners financial planning tips and guidance for dealing with today’s ever-changing financial needs from the perspective a financial advisor.  

Total Financial Solutions, Inc.

24322 Main Street

Newhall, CA 91321

661-753-9683

800-990-7344

Total Financial Solutions – Newhall

https://www.youtube.com/watch?v=dbQeMk_KgJM

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