Do I Need to Transfer Ownership?

[Barney]

These guys have given you some good advice. I will add, as it is a UL I would request an As is Inforce illustration, and a copy of the last annual report. That will give you a better projection of the future of that policy.

The illustration is the information I was emailed after my second phone call with the insurance company.

I'm not entirely sure how to decipher all of the numbers.

Is it okay to post it here? I've taken a screen shot with only numbers and no personal information.

 

[Tahoe Ray]

The illustration is the information I was emailed after my second phone call with the insurance company.

I'm not entirely sure how to decipher all of the numbers.

Is it okay to post it here? I've taken a screen shot with only numbers and no personal information.

A lot of people do that...sure. Just redact your dad's information but leave everything else (including product name).

 

[Barney]

A lot of people do that...sure. Just redact your dad's information but leave everything else (including product name).

Excellent. I am age 50 and the annual premium is $300.

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[WinoBlues]

Excellent. I am age 50 and the annual premium is $300.

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There is a lot of conversation here. Conversation and questions. If a semi healthy 50 male bought a $60,000 15 0r 20 year term plan. What you have would beat it. What is of more value to your mother. The Cash Surrender value today. Or the $60,000 if you die early. What would it cost her to replace any help you provide her? Do you or your family need this inforce policy? This policy is non contestible(sp).

Being a UL it could also be adjusted within its limits. Example > lowering the face amount and premium.

 

[Barney]

I have no children, so I'm not worried about providing for a family of my own. My mother is in her 80's and is very financially stable. So the death benefit is effectively inconsequential to her should I die while she is still living.

I suppose we should be looking at maximizing the surrender value options and minimizing the taxable ramifications.

I'm not at all clear on the options regarding adjusting the policy?

 

[Allen Trent]

I have no children, so I'm not worried about providing for a family of my own. My mother is in her 80's and is very financially stable. So the death benefit is effectively inconsequential to her should I die while she is still living.

I suppose we should be looking at maximizing the surrender value options and minimizing the taxable ramifications.

I'm not at all clear on the options regarding adjusting the policy?

Appears if you cash the policy out, there will be a $5500 or so 1099 reported as taxable. I say that because the top left of page 1 says total premiums we're $5100 & current Cash Value $10,600. So the amount taxable if cashed out is the gain between the 2.

 

[scagnt83]

Excellent. I am age 50 and the annual premium is $300.

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Ok. You need to do something with this. Either take the cash, or put more cash into it.

Allen is correct in the taxation. So if you want the cash and dont want the policy, transfer ownership to yourself, and just cash it out.

But, this is a pre 1988 policy, meaning it has grandfathered status for taxation of the Cash Value, as long as the policy remains active.

You can access the CV on an income tax-free basis. But if you pay too much in premiums with post-1988 policies, that tax benefit stops. Your policy is allowed to pay as much premium as you want, and it will always remain income tax-free to access the CV.

So you can pay the maximum premium of $765/y, and it will create a tax-free pot of money for you in the future. Its not going to be huge, but it could be $40k by age 70.

The policy is getting a guaranteed interest rate of 4%, insurance charges are taken out of that, then your CV gets most of the rest. So you might be at 3% net, which is a pretty solid number for a guaranteed interest rate, especially considering the tax benefits.

IF this is something that interests you, ask the carrier for an "inforce illustration" showing the Guideline Level Premium of $765/y, stopping at age 80. That should give you a good idea of what the policy can do from a savings aspect at this point. If it doesnt interest you, take ownership and just Surrender the Policy and take the cash.

 

[WinoBlues]

Good Thread
Seeing the problem from different angles and experiances.