Legacy Accounts: Life Insurance's Future-Proof Offering

A legacy account is an interest-earning account that gives beneficiaries the time and space to make informed decisions about their insurance payment following a loss. It is not a bank account, but it gives you full control over the money, which can be accessed immediately or left in the account to grow over time. When a life insurance claim of $10,000 or more is paid out, beneficiaries are invited to take advantage of a legacy account. This account is designed to help lessen the stress of financial decision-making during an overwhelming time, allowing beneficiaries to focus on healing.

The purpose of a legacy account

While a legacy account is not a bank account, it provides features that give beneficiaries full control over the money. They can access their funds immediately, keeping them safe and secure, with the option to transfer or withdraw funds at any time. The account earns daily interest, which is higher than most savings accounts, ensuring that the beneficiary's money grows over time. This competitive interest rate means their money is working for them while they take the necessary time to heal and reflect.

One of the key advantages of a legacy account is that it keeps insurance funds separate from day-to-day transactions. This helps beneficiaries be more intentional with their spending and encourages thoughtful financial planning. With no monthly service or maintenance fees, beneficiaries have transparency and autonomy over their funds. They can choose to leave the funds in the account, allowing them to accumulate with interest, or use them as needed.

Additionally, legacy accounts offer a sense of security during an uncertain time. Backed by the financial stability of trusted institutions, beneficiaries can rest assured that their funds are secure. This stability can provide a small sense of comfort and support when dealing with the loss of a loved one. Overall, the purpose of a legacy account is to empower beneficiaries with financial flexibility, time to heal, and the ability to make informed decisions about their future financial plans.

How it helps beneficiaries

A legacy account is an interest-earning account that gives beneficiaries the time and space to make informed decisions about their insurance payment following a loss. It is not a bank account, but it gives beneficiaries full control over the money.

Legacy accounts are designed to help beneficiaries in several ways. Firstly, they provide time to make financial decisions without the pressure of immediate access to funds. Beneficiaries can carefully consider how best to utilise their insurance payment and make decisions when they feel ready. This flexibility helps to lessen the stress of financial decision-making during an already challenging time, allowing beneficiaries to focus on healing.

Secondly, legacy accounts keep insurance funds separate from day-to-day transactions. This separation helps beneficiaries be more intentional with their spending and ensures the money is used for its intended purpose. By keeping the funds in a legacy account, beneficiaries can avoid the temptation to spend the money impulsively or on non-essential purchases.

Additionally, legacy accounts offer daily interest rates that are typically higher than those of savings accounts. This means that while beneficiaries take the time to reflect and make decisions, their funds continue to grow. The competitive interest crediting rates ensure that the money works for the beneficiary, providing an added financial boost during a difficult period.

Finally, legacy accounts offer peace of mind and security. Backed by the financial stability of trusted institutions, beneficiaries can rest assured that their funds are secure. This sense of stability can be especially valuable during uncertain times, providing a small sense of reassurance when dealing with the loss of a loved one.

Overall, legacy accounts aim to provide beneficiaries with the time, flexibility, and financial stability needed to navigate the challenges that arise after a loss. By offering a safe and controlled environment for insurance funds, legacy accounts help beneficiaries make informed decisions while also allowing for the funds to grow through competitive interest rates.

Interest rates and access to funds

A Legacy Account is an interest-earning account that provides beneficiaries with the time and space to make informed decisions about their insurance payment following a loss. It is not a bank account, but it gives beneficiaries full control over the money.

The funds in a Legacy Account are available to beneficiaries immediately after setup. They can be accessed by writing drafts (which function like cheques), transferring, or withdrawing funds at any time. Alternatively, beneficiaries can leave the funds in the account to grow over time. There are no monthly service or maintenance fees associated with the account, and beneficiaries have full control of their funds.

The interest rates on a Legacy Account are competitive and higher than most savings accounts. Account holders receive a guaranteed minimum interest rate of 0.05% per year, ensuring that their interest rate will not fall below this level. The interest rate may change over time and is adjusted monthly based on various economic factors, including prevailing market rates for short-term demand deposit accounts, bank money market rates, and Federal Reserve interest rates.

The daily interest earned on a Legacy Account helps beneficiaries' money work for them while they take the necessary time to reflect and make decisions about their financial plans. This feature provides peace of mind and stability during uncertain times.

Choosing beneficiaries

A legacy account is an interest-earning account that gives beneficiaries time and flexibility to make informed decisions about their insurance payment after a loss. This can help lessen the stress of making important financial decisions and provide time to focus on healing.

Understanding Beneficiaries

Firstly, it is important to understand what a beneficiary is and their role. A beneficiary is a person or entity that you legally designate to receive the benefits from your financial products, such as life insurance policies, retirement accounts, or investment accounts. This person or entity will receive the death benefit payout after your passing.

Primary and Contingent Beneficiaries

There are two types of beneficiaries: primary and contingent. A primary beneficiary is the first in line to receive the death benefit and is typically a spouse, child, or other family member. You can name multiple primary beneficiaries and decide on the portion of the death benefit each will receive.

In case your primary beneficiary dies before or simultaneously with you, you can also name at least one backup beneficiary, known as a secondary or contingent beneficiary. Contingent beneficiaries will receive the death benefit if the primary beneficiaries are all deceased or cannot be located. It is essential to have both primary and contingent beneficiaries designated.

Choosing the Right Beneficiaries

When choosing beneficiaries, consider those who are financially dependent on you or who will suffer financially due to your loss. This could include your spouse, children, or other family members. You can also name a trustworthy adult as the primary beneficiary and rely on their judgment to distribute funds to other family members or loved ones.

If you have no one financially dependent on you, you may consider naming a favourite charity as the beneficiary to donate your death benefit to a cause you care about. You can also split the benefit among multiple beneficiaries, ensuring the total percentage equals 100%.

Naming Minors and Dependents

Children under 18 can be named as primary or contingent beneficiaries, but there are legal implications to consider. The proceeds may be sent to the legal guardian of the minor child's estate or placed in a trust until the child reaches the legal age of consent. Consult an attorney to set up the best arrangement for your situation.

If you have special needs dependents or other lifelong dependents, consider establishing a special needs trust and naming the trust as the beneficiary. This will ensure they receive financial support without triggering laws that may work against them and affect their government assistance.

Updating and Changing Beneficiaries

It is important to keep your beneficiary designations up to date as your life changes, such as marriage, divorce, the birth or adoption of a child, or the death of a loved one. Remember that a beneficiary designation cannot be changed or corrected after your passing, so review and update your beneficiaries regularly.

You can change beneficiaries by contacting your employer, financial professional, or financial services company. If you have a revocable beneficiary, you can change them without their consent, but an irrevocable beneficiary will require their consent to make changes.

Estate planning

A legacy account is an interest-earning account that provides beneficiaries with the time and space to make informed decisions about their insurance payment following a loss. When a life insurance claim of $10,000 or more is paid, beneficiaries are invited to establish a legacy account. While not a bank account, a legacy account gives beneficiaries full control over the money, allowing them to decide how best to use their insurance payment without the pressure of immediate financial decisions. This can be especially beneficial when coping with the death of a loved one, as it provides time to focus on healing while knowing that the insurance funds are secure and easily accessible.

One important consideration in estate planning is how to maximize the value of your assets for your beneficiaries. This may involve purchasing life insurance to pass along the value of your assets to the next generation, ensuring that your finances will last and creating a lasting legacy. For example, you can use active and passive investment management options, as well as protected investments such as lifetime income guarantees. By increasing the distribution rate over a longer period, you can make life insurance a tax-free legacy for your beneficiaries.

Additionally, estate planning can involve exploring alternative financial systems that do not rely on traditional institutions. For instance, infinite banking allows individuals to create their own banking system, providing capital throughout their lives without depending on external financial institutions. This can be a way to ensure that your financial legacy is secure and accessible to your loved ones when they need it.

Overall, estate planning is a thoughtful and considerate process that allows you to protect your assets and provide for your loved ones even after you're gone. By taking the time to plan your estate, you can rest assured that your wishes will be carried out and your legacy will be preserved.

Frequently asked questions