BENEFITS OF INHERITANCE TAX PLANNING

BENEFITS OF INHERITANCE TAX PLANNING

 WITH LIFE INSURANCE

Adeoye Falade

30 April 2021

As a potential Rich, you can grow the value of your estate with Whole Life Assurance by looking beyond its use for funding estate tax. The Rich adopt life insurance to fund inheritance tax and derive many benefits during their lifetime. Their representatives and beneficiaries also benefit through preservation of the estate value. 

Life insurance guarantees that there will be fund for paying estate tax when the owner dies. It relieves the personal representatives and beneficiaries of the financial stress associated with seeking fund for paying the estate tax. It shortens the time for paying and aids an early distribution of the assets to the beneficiaries. It also prevents selling some of the assets at forced sales value due to lack of title. This preserves the value of the estate for the beneficiaries.

The estate owner enjoys reduction in their income tax during active working life. The tax saving provides a source of fund for planned long-term investment to enhance the estate value. The policy can be a source of liquidity for handling emergency cash needs. With adequate financial education, the Rich also access fund for investment for further wealth building. 

Life insurance has very high potential for enhancing the value of the estate owners pass on to family generations after them. It however requires a good understanding and knowledge of investment and associated risks. It also requires a long-term outlook to realize its full potential as a financial planning tool.   

INHERITANCE TAX PLANNING:

TAX SAVING ON LIFE INSURANCE PREMIUM

The Rich add substantial value to their estate through tax saving from life insurance premium relief on their income. Taxpayers resident in Ghana pay as much as 30% income tax on their Chargeable Income over GHC240,000. However, the life insurance premium they pay will be from the excess if they have life policies on their lives. They save the tax on that through the provision of life insurance premium relief in the tax law. The following example illustrates the tax saving. 

A 40-year old Rich bought a GHC2,500,000 whole life assurance to fund the estate tax on his/her death. The annual premium on the Limited Premium Whole Life Assurance is GHC50,000 payable up to age 65. His/her chargeable income is GHC500,000. 

The excess chargeable income is GHC260,000 (GHC500,000 – GHC240,000). The excess falls within the 30% band rate. The tax on the excess is GHC78,000 (30% of GHC260,000). 

Life policyholders are entitled to deduct life insurance premium relief on their income. The premium of GHC50,000 is therefore deductible from the excess of the chargeable income above the GHC240,000 threshold. The chargeable income reduces to GHC450,000 and the excess to GHC210,000 (GHC260,000 – GHC50,000). The tax on the reduced excess falls to GHC63,000 (30% of GHC210,000). That is an annual tax saving of GHC15,000. 

The tax saving and provision of liquidity for investment is the subject of the next article.  

Profile of Amos Adeoye Faladesa 

Mr Falade is a 1980 graduate of the University of Ibadan.  He holds a Bachelor of Science, Second Class Honours  (Upper Division) Degree in Economics (1980) and Master  of Communication Arts Degree (2002) from Ibadan. He is  an Associate, Chartered Insurance Institute, London  (ACII) 1985 and Associate, Chartered Institute of  Stockbrokers (ACS) 2010. He also holds the Authorized  Dealing Clerk’s Certificate of The Nigerian Stock Exchange (2011). He is a Member, Equipment Leasing Association  of Nigeria (ELAN); Member, Institute of Financial  Planners. He is also a Fellow of the West African  Insurance Institute. 

He specialized in Life Insurance and Pension in his  insurance career that commenced in 1975. He attended several courses on life insurance including Actuarial  Aspects of Life Insurance by Swiss Re/West African  Insurance Institute, Monrovia, Liberia (1984) and India’s  National Insurance Academy (1997). 

He taught several generations of student life  insurance and pension preparatory for the professional  examinations of the Chartered Insurance Institute,  London from 1987, and Chartered Insurance Institute of  Nigeria from 1989. Since 2002, he has taught Pension 

Planning & Administration and Life Insurance at the West  African Insurance Institute, Banjul, The Gambia where he  is a Visiting Lecturer. He is also a resource person for the  Association of Investment and Portfolio Managers. 

He held top management positions in the financial  services industry. He was Head of Pension in Niger  Insurance (1982 to 1988); General Manager (Life and  Pensions), Nigerian French Insurance Company Limited  (1988 – 2003); General Manager/Chief Executive Officer,  Guardian Express Assurance Limited (2003 – 2008) where  he retired. He was Managing Director/Authorised Dealing  Clerk, Golden Capital Plc (2011 – 2014). He is currently a  Stockbroker/Dealer on The Nigerian Stock Exchange. 

He held several positions in the insurance industry  before retiring in 2008. He was Chairman, Life Offices Committee (2003 – 2006) and a Member of the  Governing Council of the Nigerian Insurers Association (2007 – 2008). He represented the Association in many  national assignments including the Securities and  Exchange Commission’s Committee on Pension (2001/2002), and Central Bank of Nigeria’s Financial  Systems Strategy (FSS 2020). 

Mr Falade is a writer. He has written many articles  on life insurance and pensions published in local and  international professional journals. His four books on 

Life Insurance and Life Annuity are in the process of  publication.


 [E1]Profile of Amos Adeoye Falade 

Mr Falade is a 1980 graduate of the University of Ibadan.  He holds a Bachelor of Science, Second Class Honours  (Upper Division) Degree in Economics (1980) and Master  of Communication Arts Degree (2002) from Ibadan. He is  an Associate, Chartered Insurance Institute, London  (ACII) 1985 and Associate, Chartered Institute of  Stockbrokers (ACS) 2010. He also holds the Authorized  Dealing Clerk’s Certificate of The Nigerian Stock Exchange (2011). He is a Member, Equipment Leasing Association  of Nigeria (ELAN); Member, Institute of Financial  Planners. He is also a Fellow of the West African  Insurance Institute. 

He specialized in Life Insurance and Pension in his  insurance career that commenced in 1975. He attended several courses on life insurance including Actuarial  Aspects of Life Insurance by Swiss Re/West African  Insurance Institute, Monrovia, Liberia (1984) and India’s  National Insurance Academy (1997). 

He taught several generations of student life  insurance and pension preparatory for the professional  examinations of the Chartered Insurance Institute,  London from 1987, and Chartered Insurance Institute of  Nigeria from 1989. Since 2002, he has taught Pension 

Planning & Administration and Life Insurance at the West  African Insurance Institute, Banjul, The Gambia where he  is a Visiting Lecturer. He is also a resource person for the  Association of Investment and Portfolio Managers. 

He held top management positions in the financial  services industry. He was Head of Pension in Niger  Insurance (1982 to 1988); General Manager (Life and  Pensions), Nigerian French Insurance Company Limited  (1988 – 2003); General Manager/Chief Executive Officer,  Guardian Express Assurance Limited (2003 – 2008) where  he retired. He was Managing Director/Authorised Dealing  Clerk, Golden Capital Plc (2011 – 2014). He is currently a  Stockbroker/Dealer on The Nigerian Stock Exchange. 

He held several positions in the insurance industry  before retiring in 2008. He was Chairman, Life Offices Committee (2003 – 2006) and a Member of the  Governing Council of the Nigerian Insurers Association (2007 – 2008). He represented the Association in many  national assignments including the Securities and  Exchange Commission’s Committee on Pension (2001/2002), and Central Bank of Nigeria’s Financial  Systems Strategy (FSS 2020). 

Mr Falade is a writer. He has written many articles  on life insurance and pensions published in local and  international professional journals. His four books on 

Life Insurance and Life Annuity are in the process of  publication.

 [E2]Profile of Amos Adeoye Falade

Mr Falade is a 1980 graduate of the University of Ibadan.  He holds a Bachelor of Science, Second Class Honours  (Upper Division) Degree in Economics (1980) and Master  of Communication Arts Degree (2002) from Ibadan. He is  an Associate, Chartered Insurance Institute, London  (ACII) 1985 and Associate, Chartered Institute of  Stockbrokers (ACS) 2010. He also holds the Authorized  Dealing Clerk’s Certificate of The Nigerian Stock Exchange (2011). He is a Member, Equipment Leasing Association  of Nigeria (ELAN); Member, Institute of Financial  Planners. He is also a Fellow of the West African  Insurance Institute.

He specialized in Life Insurance and Pension in his  insurance career that commenced in 1975. He attended several courses on life insurance including Actuarial  Aspects of Life Insurance by Swiss Re/West African  Insurance Institute, Monrovia, Liberia (1984) and India’s  National Insurance Academy (1997).

He taught several generations of student life  insurance and pension preparatory for the professional  examinations of the Chartered Insurance Institute,  London from 1987, and Chartered Insurance Institute of  Nigeria from 1989. Since 2002, he has taught Pension

Planning & Administration and Life Insurance at the West  African Insurance Institute, Banjul, The Gambia where he  is a Visiting Lecturer. He is also a resource person for the  Association of Investment and Portfolio Managers.

He held top management positions in the financial  services industry. He was Head of Pension in Niger  Insurance (1982 to 1988); General Manager (Life and  Pensions), Nigerian French Insurance Company Limited  (1988 – 2003); General Manager/Chief Executive Officer,  Guardian Express Assurance Limited (2003 – 2008) where  he retired. He was Managing Director/Authorised Dealing  Clerk, Golden Capital Plc (2011 – 2014). He is currently a  Stockbroker/Dealer on The Nigerian Stock Exchange.

He held several positions in the insurance industry  before retiring in 2008. He was Chairman, Life Offices Committee (2003 – 2006) and a Member of the  Governing Council of the Nigerian Insurers Association (2007 – 2008). He represented the Association in many  national assignments including the Securities and  Exchange Commission’s Committee on Pension (2001/2002), and Central Bank of Nigeria’s Financial  Systems Strategy (FSS 2020).

Mr Falade is a writer. He has written many articles  on life insurance and pensions published in local and  international professional journals. His four books on

Life Insurance and Life Annuity are in the process of  publication.

Ebenezer Odartey Lamptey

I was born in the Eastern part of Ghana called Koforidua. I'm 43 years old and married to a beautiful wife (Eunice). I was brought up by my mother alone when our family was broke down by my Mom's best friend who turned out to be my Daddy's second wife. Life was difficult where my mum had to do other menial jobs to feed me after she was fired from work for taking me with her to work. What my mum knew was to educate me to get good grades and get the best paying job which she thought was becoming a medical doctor. finally, I ended up in the insurance industry and working for almost a decade. I enjoyed one moment in life when my mother visited me in the western part of the country while on leave. we had the best time when I picked her on my back to show how I wished we are together and my kids pulling her clothes to come down for their turn, ( Grand Maaa, Grand Maaa, it's my turn to be picked by Daddy); Unfortunately, she had a mild paralysis when her Blood Pressure raised and there was no one with her that night when she left my place to her lonely apartment. She died after six months while bedridden. I felt I have enough time for my family afterward. It never happened since I was enslaved to work from 9 to 5. I was not able to move from my comfort zone for my passion which will give me time for my family. Today, I have found what makes me happier and have more time for the people that I care for. My family time together for a silly walk and talk, questions my kids ask which take them to where they want to be in the next 100 years today. They are adults in their own world and their mind is like a lump of wet clay that whatever I print on it will stack which is the best time to give them the best they need from their mentor. I now know my wife also has a passion too.

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