An example of how Universal Life policy can be used in legacy planning is shown below:
Mr Teo, aged 55, has cash assets of $6 million currently. He would like to distribute an adequate amount of equal portion of assets to his two children, keep a portion for his retirement usage and an amount of $500,000 for charity.
Mr Teo has worked hard for his life and he would like to enjoy a comfortable lifestyle upon his retirement. Through proper financial planning, $3 million is required for his dream retirement lifestyle.
Thinking ahead, the remaining balance of $3 million cash assets will be distributed to his two children equally and to a designated charity organization. In this case, his two children will be left with $1.25 million each after $500,000 has been donated to charity. This amount of $1.25 million might not be enough to fulfill his legacy planning wishes to ensure that his future generations are well taken care of.
With these figures in mind, Mr Teo used $3 million to purchase a Universal Life policy for a sum insured of $8 million (#For illustration purposes only. Actual premium and sum insured depends on age, gender, smoker/non-smoker status and health conditions).
the implementation of Universal Life policy (of sum insured value of $8 million) into his legacy plan, Mr Teo can donate more to the charity organization (example: $1 million) and his two children will be willed with $3.5 million each. In this way, Mr Teo is able to happily spend his $3 million retirement fund and not worry about his children’s future. At the same time, the Universal Life policy has interest crediting and cash accumulation features and he is able to use the fund should he outlive his wealth resources.