If you have been reading my column over the years, you probably remember me raving about liquid modified endowment contracts. They were a specially designed insurance contract that provided safety, liquidity, really attractive tax-deferred growth potential; a tax-free, long-term-care benefit; and a tax-free death benefit.
Unfortunately, the two insurance companies that were offering these reduced the contribution limits a couple of years ago and then last year took them off of the market completely. The great news is that they are now available again for deposits of up to $1 million.
Here are the practical uses. You can choose to receive fixed interest for one year, which, after insurance costs are deducted, will net you about 1.5% interest for the year. Money market is paying about 1% less than that right now.
Alternatively, you can link your interest for the first year to the S&P 500 Index. If the Index goes up, you could potentially make up to 8.5% interest for the year, less insurance costs. If the index is down for the year, you would still receive about .5% interest for the year.
So you can choose to earn approximately an extra 1% more per year than a money market account or you can elect to have the opportunity to make more than 8% interest without any investment risk.
All funds are completely liquid from day one. Unlike a bank account or money market account, you will not owe any taxes on the interest unless you decide to take the interest out of the account. Moreover, as previously mentioned, besides using this as a strategy to safely make more interest than typical savings vehicles, as long as your account remains open, you also will receive a significant tax-free death benefit, which is also accessible while you are alive if you are unable to perform two out of six daily activities of living. For more information call our office or text the word MEC to 474747.
This material is provided for informational purposes only, is general in nature, and is not a recommendation to buy or sell any investment or adopt any investment strategy. It does not consider the specific investment objectives, tax and financial condition, or risk tolerance of any investor.
Keith Singer is an attorney and Certified Financial Planner and he offers Advisory Services through Singer Wealth Advisors, a Florida Advisory firm.
Singer Wealth Management
1515 S. Federal Highway, #211, Boca Raton, FL 33432
500 S. Australian Ave., Suite 600, West Palm Beach, FL 33401
Past performance does not guarantee future results. This material is for information purposes only and does not take into account the investment objectives, financial situation or particular needs of any individual. Hedge funds, private equity and other alternative investments involve a high degree of risk and can be illiquid due to restrictions on transfer and lack of a secondary trading market.