Craig Wear (CFP®) explains that cash-value life insurance allows tax-free policy loans and provides death benefits that can exceed the premiums paid, making it a useful vehicle for estate building. He also cautions that these policies have important limitations when owners reach ages where they contemplate substantial Roth IRA conversions.
You've got the ability to take out loans free of any tax, so you get income and not pay tax on it. And when you pass, you're able to leave death benefits to your heirs, your spouse, or your heirs. And in a lot of cases, the death benefits can be a whole lot more than the actual money that you put into it. So it's a good way to build your estate as well. And as great as they are, those kind of policies do have some limitations when you get to the age where you're really considering doing substantial Roth conversions.
