Life Insurance | TRUST-CFO®

Life Insurance


There is a fallacy that Life Insurance is protected from creditors in California. IT IS NOT! Life Insurance only has a $12,800 exemption on policy cash values, and death benefits are protected only up to need, as may be determined by a judge. Married couples get to double-up the exemption to $25,600 – wow!
A creditor can make a claim just like a checking account and force a liquidation to pay the claim! Our clients get visually upset when we disclose that their family can be left destitute if the policy is owned in one’s own name and they get sued. Again, personal ownership is the demise of exemption protection planning.
But if properly recharacterized of retirement, estate planning, or business needs, all benefits of a life insurance policy can be fully exempt from creditor lien, attack and seizure:
  • All cash values are exempt from creditor attachment
  • All policy distributions are exempt, even after paid from the policy
  • All death benefits paid to beneficiaries are creditor exempt

Life Insurance is one of the last true tax-exempt asset classes. Assuming properly set up, policy cash values grow tax-deferred. Policy values can also be paid out tax-free using preferred policy loans, and death benefits are usually income-tax free.
However, if not careful, one can trigger multiple other tax issues, including taxable gain from policy termination/lapse, employer-owed policy taxation of benefits, and of course estate tax inclusion. Change of ownership to claim exemption benefits is critical to manage and administrate.
TRUST-CFO® is an expert consultant to top attorneys, accountants and advisors on exemption planning designs for advanced life insurance planning. We can show clients how to:
  • Grow & Distribute Cash Values Tax-Free
  • Secure Income & Estate Tax Free Death Benefits
  • Avoid EOLI tax triggers to businesses

One of the challenges with Life Insurance is premium outlay and low IRR during early years that can hurt business and investment cash flows. TRUST-CFO® is the reigning expert on utilizing Exempt Insurance & Retirement Trusts to capitalize on benefits a personally-owned policy does not provide. Some powerful enhancements include:
  • High-Cash Value, Low-Cost, & No Surrender Charge Policy Designs
  • Leveraged Retirement Plan & Compensation Policy Designs
  • Fuel business & investment growth planning opportunities
  • Recapture LOC (Lost Opportunity Costs) on Premium Dollars
TRUST-CFO® can ensure that a well-structured life policy optimizes all creditor and tax exemptions to optimize future tax-free benefits while also supporting critical business and investment cash flow needs to maintain profits and returns.

To find out if your life insurance can be exempt begin your free Exemption Diagnostic now

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