Year-End Checklist for High-Income Earners Using Life Insurance

As the year winds down, high-income earners often turn their attention to last-minute tax planning and financial clean-up. While charitable contributions and retirement plan funding typically top the list, one powerful planning tool is often overlooked — life insurance.

Life insurance is not just about providing death benefits. For successful individuals, it can offer unique tax advantages, provide liquidity for estate taxes, offer asset protection, and facilitate business continuity planning.

But like any financial instrument, it needs regular review and proactive management. This year-end checklist will help you make sure your coverage is working as hard as you are — before December 31st rolls around.

1. Does Your Coverage Still Align with Your Financial Goals?

• Your income, assets, liabilities, and legacy intentions may have changed significantly over the last year. It’s worth asking:
• Has your net worth grown?
• Did your income spike or drop?

Have there been changes to your family or business structure?

If so, your existing policies may not reflect your current needs. A review can help determine whether the face amount, policy type, or structure still supports your financial objectives. Often, policies are left untouched for years—until it’s too late to make meaningful changes.

2. Evaluate the Performance of Your Permanent Policies

Permanent life insurance (such as whole life, indexed UL, or variable UL) often includes a cash value component that depends on interest rates, dividends, or market performance. Decreasing interest rates, cost-of-insurance increases, and outdated policy assumptions can cause older policies to underperform or even lapse.

You should:

• Review updated in-force illustrations.
• Examine how current performance compares to original projections.
• Identify whether current premiums are still on track.

If your policy has a loan, review the loan balance and interest accrual. Unmanaged loans are one of the most common reasons policies lapse unexpectedly. As interest rates rise, these costs can quickly compound.

3. Maximize Contributions to Tax-Favored Policies Before Year-End

High-income earners frequently use overfunded permanent life insurance for tax-deferred accumulation and tax-free withdrawals later in life. If your policy has not been funded to the maximum allowable limit, now may be the time to increase your contribution before the window closes.

Make sure your contributions don’t cause the policy to become a Modified Endowment Contract (MEC), which changes the taxation of future withdrawals.
With proper design and monitoring, you can build significant supplemental retirement income within the policy, while preserving death benefit protection.

4. Take Advantage of Estate and Gift Planning Opportunities

The IRS recently announced that the federal estate and gift tax exemption will be increased to approximately $15 million per individual starting in 2026. While this is higher than the 2025 exemption (just under $13.5 million), it removes the uncertainty around a potential sunset and gives high-net-worth individuals clarity for long-term planning.

Now is the time to:

• Review whether you’ve used your annual exclusion gifts for the year ($19,000 per recipient in 2025).
• Consider funding or making gifts to an Irrevocable Life Insurance Trust (ILIT).
• Explore using life insurance in conjunction with Spousal Lifetime Access Trusts (SLATs) or other estate freeze strategies.

Life insurance can amplify the impact of these gifts, turning discounted or leveraged transfers into tax-free death benefit payouts outside of your estate.

With the lifetime exemption increasing, proactive planning remains essential—not out of urgency, but to maximize efficiency and ensure your estate plan reflects your long-term goals.

5. Check on Business-Related Coverage

For business owners, life insurance is often a key piece of the company’s continuity and risk management plan. Before year-end, make sure your business-related policies are still serving their purpose.

• Buy-Sell Agreements: Are they properly funded? Do the death benefit amounts reflect current business valuation?
• Key Person Insurance: Are your key employees or executives adequately covered?
• Corporate-Owned Policies: Do you have policies owned by the business that might benefit from additional funding or tax-advantaged planning strategies like the Restricted Property Trust?

Business growth can quickly make existing policies inadequate, especially if no formal valuation has been done recently.

6. Review Ownership and Beneficiary Designations

Changes in family dynamics, trusts, or tax laws can make old beneficiary designations obsolete—or worse, problematic.

Check:

• Are your beneficiaries up to date?
• Are minors listed directly (which may require court oversight)?
• Is your policy owned by the right entity (you, your spouse, your business, or a trust)?

Ownership structure affects both income and estate taxation. A poorly structured policy can inadvertently pull the death benefit into your taxable estate or trigger unintended consequences.

7. Gift Premiums to Your ILIT Before December 31

If you’ve established an Irrevocable Life Insurance Trust, don’t forget to fund it before year-end to pay premiums. These contributions typically qualify for the annual exclusion gift amount, but they must be made and documented properly.

Remember:

• Gifts should be made early enough for the trustee to send Crummey notices to beneficiaries.
• Late funding or missed notices can jeopardize the tax treatment of the trust.

A small administrative misstep here can lead to big problems later.

8. Reevaluate Premium Financing and Existing Policy Loans

If you’re using premium financing or your policy includes outstanding loans, now is the time to review:

• Current interest rates and their impact on the overall cost of financing.
• Collateral requirements — do you still meet them comfortably?
• Whether the current financing structure is still appropriate given your financial goals.

With interest rates climbing over the past few years, strategies that made sense in a low-rate environment may need to be restructured or paid down.

9. Coordinate Across Your Advisory Team

Year-end planning is the perfect time to connect your financial planner, estate attorney, CPA, and life insurance advisor. Many of the most effective strategies depend on alignment across these disciplines.

For example:

• Gifting strategies must be coordinated with tax filings.
• Estate plans must be updated to reflect new policies or trust arrangements.
• Business strategies often require input from multiple advisors to remain compliant and tax-efficient.

If you haven’t already, consider hosting a short joint meeting (or Zoom call) before year-end to ensure everyone is on the same page.

10. Document, Follow Up, and Set a Mid-Year Checkpoint

After completing your year-end review:

• Store updated illustrations, ownership documents, and trust agreements in a secure folder.
• Set calendar reminders for any follow-up actions in January (such as additional contributions or Crummey notices).
• Schedule a mid-year review in 2026 to reassess your planning—especially if your net worth continues to grow.

Final Thoughts

For high-income earners, life insurance is more than just a death benefit — it’s a powerful, multi-dimensional planning tool. But like any part of your financial plan, it only works if it’s maintained and optimized over time.

The end of the year presents a natural checkpoint. By reviewing your policies now, coordinating with your advisory team, and taking advantage of tax and estate planning windows, you can avoid costly oversights—and turn a simple policy into a strategic advantage.

Next Step: Let’s Talk

Not sure where to begin? We specialize in helping high-income earners align their life insurance strategies with their broader financial goals.

Schedule a 30-minute Zoom call and let’s walk through your year-end checklist together.

DISCLOSURE

TAX ADVICE

Any tax advice contained in this communication is not intended or written to be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

These materials are not intended to be opinions or advice on legal, tax, accounting, or investment matters. Private counsel should be consulted prior to application of this general information to specific situations.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.