Why CPAs are Rethinking Life Insurance for High-Income Clients

For years, many CPAs viewed life insurance primarily as a sales product – not a planning solution. That view was understandable. Too often, proposals lacked context, coordination, or transparency, and were driven by commissions rather than client outcomes.

However, for high-income clients, that perception is starting to shift.

In today’s complex tax environment, CPAs are increasingly recognizing the unique role life insurance can play – not just for protection, but as a strategic tool for tax mitigation, estate planning, and long-term liquidity. With rising income levels, limited tax shelters, and growing estate values, life insurance is quietly re-entering the planning conversation – this time, with far more sophistication and purpose.

The Evolving Tax Landscape

Today’s high-income individuals face substantial pressure from both federal and state taxes. With deductions capped and retirement plan contributions limited, CPAs are finding that many clients earning $700,000 or more each year are running out of ways to meaningfully reduce their tax burden.

At the same time, estate planning is becoming more complex. While the current lifetime estate and gift tax exemption sits at an all-time high—$13.99 million per individual in 2025 – there’s been considerable discussion about what will happen after January 1, 2026, when key provisions of the 2017 Tax Cuts and Jobs Act are scheduled to expire.

If no legislative changes occur, the exemption will drop by roughly half. That said, there is growing speculation that Congress may extend or modify the exemption before that date.

For CPAs and their clients, this creates a planning dilemma: wait for clarity, or act now?

A Shift in Thinking: From Product to Planning Tool

Modern permanent life insurance is no longer just about a death benefit. When used properly, it becomes a flexible, tax-advantaged financial tool.

Today’s CPAs are asking:

• Can this help clients accumulate assets more tax-efficiently?
• Will it provide liquidity in estate plans that include illiquid assets?
• Is it appropriate in the context of income tax reduction strategies?

Increasingly, the answer is yes – especially when the life insurance strategy is designed in partnership with the CPA, not in isolation.

Why CPAs Are Reconsidering Life Insurance Planning for High-Income Clients

One of the key reasons CPAs are more open to life insurance planning for high-income clients is the growing tax complexity their clients face.

Permanent life insurance offers tax-deferred growth, potential access to policy values without current taxation, and a tax-free death benefit if structured correctly. These features can complement other tools in the CPA’s arsenal, particularly for clients who have maxed out traditional planning vehicles like 401(k)s or defined benefit plans.

In estate planning, life insurance inside an Irrevocable Life Insurance Trust (ILIT) can help provide liquidity to pay estate taxes, fund generational wealth transfers, or equalize inheritance when illiquid assets like businesses or real estate are involved.

And for business owners, strategies like the Restricted Property Trust can create significant current-year deductions.

Planning in a World of Uncertainty

While it’s true the estate tax exemption may not sunset in 2026, that uncertainty is exactly why many CPAs are recommending clients take action now.

Locking in today’s exemption through lifetime gifts or ILIT funding is a hedge. If the exemption is extended, no harm done – the plan still works. If it’s reduced, the client has protected a larger portion of their wealth from future taxation.

For many clients with estates between $10 million and $30 million, this isn’t about beating a deadline. It’s about maintaining choices and controlling outcomes – something CPAs understand well.

Using Life Insurance to Offset Taxes on Large IRAs

Another area where life insurance planning for high-income clients is gaining traction among CPAs is in planning for large IRAs. Since the SECURE Act eliminated the “stretch IRA” for most non-spouse beneficiaries, inherited IRAs must now be fully distributed within 10 years – often triggering significant tax acceleration for heirs.

Rather than watch those assets be taxed at the highest marginal rates, some CPAs are recommending that clients take strategic distributions during life and use the proceeds to fund life insurance owned by an irrevocable life insurance trust. This creates tax-free liquidity for heirs and offsets the value lost to income taxes.

For instance, a 70-year-old client with a $4 million IRA may begin withdrawing $200,000 annually, pay income tax on the distribution, and use the net amount to fund a permanent life insurance policy. That policy – owned by an ILIT – could deliver a $3 to $5 million death benefit, replacing the IRA value lost to taxes and keeping the proceeds out of the estate.

This approach doesn’t eliminate taxes – it works around them, using a different asset to deliver more efficient outcomes for the next generation.

Real-World Collaboration in Action

CPAs aren’t just seeing these strategies in theory. They’re playing a central role in designing and implementing them. Whether it’s reviewing tax assumptions in a Restricted Property Trust or coordinating gift funding to an Irrevocable Life Insurance Trust, today’s CPAs are more involved in life insurance planning than ever before.

Importantly, they’re not working alone. The best outcomes happen when CPAs, estate planning attorneys, and insurance advisors coordinate early – before documents are signed or premiums are paid.

A Practical Takeaway for CPAs

If you serve high-income individuals or business owners, now is the time to reevaluate the role life insurance planning for high-income clients can play in your planning toolkit.

Whether your client is facing future estate tax exposure, owns a large IRA, or simply wants to reduce income taxes while building long-term value, permanent life insurance – structured correctly – can be an efficient, flexible, and compliant solution.

Your role is not to sell it. Your role is to evaluate it with a critical eye, confirm the planning objectives, and ensure it fits within the broader financial picture.

When you do that, you not only protect your client – you elevate the level of advice you provide.

Final Thoughts

Life insurance isn’t making a comeback because the products have changed. It’s making a comeback because the planning environment has. And CPAs, more than anyone, are in the best position to identify when a strategy adds value – and when it doesn’t.

Whether the estate tax exemption sunsets in 2026 or not, the need for intelligent, tax-efficient planning is here now. And life insurance, once overlooked, is ready to serve again – not as a product, but as a powerful, multi-purpose planning solution.