Did you know that 66.6% of the total wealth in the U.S. is owned by the top 10% of earners?1 And as this wealth is passed down from baby boomers to their Generation X and millennial children, the ultra-high-net worth – and high-net worth – population continues to grow. But with wealth comes responsibility to help preserve it, ensure a smooth transition of assets to future generations, and avoid financial loss.
Life Insurance as a Wealth Transfer Tool
Many ultra-high-net worth individuals may not realize they could lose up to 40% in federal estate taxes when transferred to beneficiaries. For some households, the tax liability doesn’t end there. Currently 12 states and the District of Columbia require an additional estate and/or inheritance tax.2 Fortunately, there is an investment that is both long term and tax advantaged that can be used to pay estate taxes – life insurance. And with proper planning, life insurance can replace the need to potentially liquidate investments and or real estate to pay estate taxes.
One primary purpose of life insurance is to leave a legacy to the people you love, life insurance can also leverage your charitable giving to organizations and causes that are important to you. The charity/organization can be named the beneficiary, or the owner, of your policy. Because the tax consequences can vary, it’s important to consult with a tax professional.
Does Your Coverage Measure up to Your Worth?
One of the most neglected areas of insurance is excess liability or umbrella. While your homeowners, auto, and other insurance policies have liability limits up to a certain amount, the terms of an umbrella policy provide extended liability protection up to an additional coverage limit. As nuclear verdicts (jury verdicts of $10 million or more) continue to rise in the U.S., excess liability and umbrella policies offer invaluable coverage against personal injury, property damage, and other claims – making them one of the biggest protectors of your financial plan.3
Ultra-high-net worth and high-net-worth households may be especially susceptible to having assets that aren’t covered by a standard insurance strategy. Luxury homes and other assets are typically amassed over many years and may be overseen by multiple agents and providers. For instance, your home might be insured by one company, but the collections inside may be insured by another. High-value assets (including jewelry, fine art, planes, jets, antique cars, yachts, rental and vacation homes, and motorcycles) are not always covered by standard insurance policies, or the policies often will have restrictions on the amount they will insure. All of this underscores the importance of the need for one team that works together to help make insurance planning easier for you, while protecting your best interests for generations to come.
The Mercer Advisors Difference
When you work with Mercer Advisors, you work with a unified in-house team of professionals that connect the dots of your financial life by unifying planning, investment management, taxes, estate, insurance, trust, and more. Our insurance planning process begins with our internal insurance solutions team. The team will review your current insurance coverages to identify what you have, and how it fits into your financial plan. And as your needs change over time, so should your policies. That’s why we suggest a yearly insurance policy meeting to review existing plans, identify potential gaps in coverage, and address changes from the previous year. We’ll discuss topics, including:
- If the policy’s original goal is still valid
- Updates to your financial goals, objectives, or income
- Health or lifestyle changes
- Family and business structure status
- Pricing of your current coverage
- If the original beneficiaries are still valid
- Any lapses in coverage or higher premiums
- If your policy coverage lasts long enough
At Mercer Advisors, we work together to help make insurance planning easier for you, while ultimately protecting your best interests, for generations to come. For more information about our insurance solutions, contact your wealth advisor. If you’re not already working with Mercer Advisors, let’s talk.
1 “Wealth Distribution in the United States in the third quarter of 2023.” Statista Research Department, 20 December 2023.
2 Josephson, Amelia. “A Guide to the Federal Estate Tax for 2024.” Edited by Patrick Villanova, CEPF®, SmartAsset, 20 December 2023.
3 Grimes, Simone. “Into the Surge in High-Stakes Verdicts: A Deep Dive into Nuclear Verdicts.” Insurance Journal, 27 December 2023.
