Life insurance can potentially play an important, even prominent, role in your wealth planning efforts. But you’ve got to be careful when using life insurance. Because of the somewhat esoteric and obscure nature of some types of life insurance, it’s possible to buy the “wrong” life insurance policy for your needs—or implement life insurance-based wealth planning strategies that are too aggressive (perhaps even illegal, in the worst-case scenario).
The upshot: You might consider having a trusted advisor assess and evaluate your life insurance policies and insurance-based solutions—ones you have currently as well as any you might be considering. A review today could possibly help you sidestep problems down the line.
WHAT TO WATCH OUT FOR
There are a number of signs that should give you and your wealth managers pause when it comes to using strategies incorporating life insurance. These red flags indicate the need for significant due diligence on the part of your advisors.
A few examples of potential red flags:
- Does the strategy have clear economic benefit? Every legitimate wealth planning strategy must have a substantial and material nontax business or insurance purpose. Clearly, any attempt at tax evasion in any shape or form is unacceptable.
- Is signing a nondisclosure agreement required? Some…shall we say…less scrupulous wealth planners and life insurance agents may not permit prospective clients to submit the wealth planning strategies they’re proposing to outside review by other professionals. If you’re asked to sign one of these agreements in order to be “privileged” to learn about a strategy, it’s a sure red flag.
- Is signing a hold harmless agreement required? This type of agreement says that the provider of the strategy is not legally responsible for what happens to you because of the strategy. Any formal agreement that limits the liability of the provider of a wealth planning strategy is a cause for serious concern.
- Does the professional proposing the strategy consistently avoid explaining it, instead advocating the need to just trust them? All legitimate wealth planning strategies are transparent.
Let’s be clear here: In our experience, the vast majority of professionals do not take actions that create red flags. Still, such professionals do exist, and you need to watch out for them. Wealth planners and life insurance specialists should employ legal strategies and should push back against those strategies that are over the line. Any wealth planning strategy that may potentially compromise you in some way should be avoided at all costs.
Fidato Wealth LLC is a Registered Investment Adviser. Please note that the use of the term “SEC Registered Investment Adviser” and description of Fidato Wealth LLC and/or our associates as “registered” does not imply a certain level of skill or training. This brochure is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Fidato Wealth LLC and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Fidato Wealth LLC unless a client service agreement is in place. If you are not the intended recipient, or the employee or agent responsible for delivering the message to the intended recipient, you are notified that any review, copying, distribution or use of this transmission is strictly prohibited. If you have received this transmission in error, please (i) notify the sender immediately by e-mail or by telephone and (ii) destroy all copies of this message. Please note that trading instructions through email, fax or voicemail will not be taken, as your identity and timely retrieval of instructions cannot be guaranteed. If you do not wish to receive marketing emails from this sender, please send an email to sayhello@fidatowealth.com. This article was published by the VFO Inner Circle, a global financial concierge group working with affluent individuals and families and is distributed with its permission. Copyright 2025 by AES Nation, LLC. Fidato Wealth is not affiliated with AES Nation, LLC. AES Nation, LLC is the creator and publisher of the VFO Inner Circle Flash Report.
DOWNLOAD A PDF VERSION OF THIS ARTICLE HERE
