The definitive succession strategy: why whole life insurance outperforms alternatives such as purchasing real estate – 02/24/2024 – From Grão to Grão

When it comes to estate planning, many face the dilemma of how to leave a meaningful legacy for their loved ones. The choice between the different forms of asset transfer, which are efficient in tax terms and protected from legal complications, is complex. Traditionally, buying property to leave as an inheritance is a common practice, but is this the best option available?

Real estate, although tangible and often valued as secure investments, brings with it a series of challenges in the context of succession. Issues such as division between heirs, maintenance costs, transfer taxes and the possibility of protracted litigation can significantly complicate the wealth transfer process. Furthermore, real estate liquidity is often limited and may not provide immediate financial support when most needed.

In contrast to the disadvantages of real estate, whole life insurance presents itself as a robust and strategic solution for succession planning. This type of insurance not only offers lifetime coverage, but also accumulates cash value, which grows over time and can be used by the insured person during their lifetime.

One of the main attractions of whole life insurance is its asset protection capacity. The amount allocated to beneficiaries is generally tax-free and protected from legal problems, including disputes between heirs or creditors. This characteristic ensures an efficient, direct transfer of assets with maximum value preservation.

Additionally, for businesspeople this is an excellent asset protection and security tool for corporate succession of companies.

The perception that insurance is an expense with no return or that the cost is prohibitive disappears when we analyze the benefits. In addition to protection and value accumulation, whole life insurance is a form of asset leverage. From the first payment, the insured guarantees his or her loved ones a significant amount of wealth, often greater than what could be accumulated during his or her lifetime.

Considering a rate of return of 5% per year above inflation on investments, whole life insurance surpasses the same value placed on fixed income securities in net asset value over more than 20 years.

This type of insurance allows, regardless of the insured’s current stage of asset accumulation, beneficiaries to have guaranteed access to a considerable legacy. Furthermore, in times of adversity, whole life insurance provides dependents with immediate financial protection, ensuring the continuity of their well-being and life projects.

Compared to purchasing real estate for succession, whole life insurance offers a superior alternative in terms of tax efficiency, protection from litigation, and ease of transfer.

It represents not only an intelligent succession planning strategy, but also a powerful form of asset leverage, ensuring the financial security of loved ones. By opting for whole life insurance, you choose a succession path that transcends traditional limitations, ensuring a lasting and protected legacy.

Therefore, whole life insurance should be considered within the context of your investments as an indispensable wealth and succession planning tool.

Michael Viriato is an investment advisor and founding partner of Investor’s House.

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