Sibling Problem

[Mavrik]

So a women just told me about a problem she and her family want to solve with life insurance. Hoping to get a few outside opinions...

Her elderly mother moved into her brother and his wife's house a while back. The mother poured her life savings($150,000) into expanding and remodeling their house. The son and his wife fell on tough times, took an equity line on the house(essentially stealing the mother's money) blew it and then subsequently lost the house to the bank.

The mother has since passed away and had none of her money to leave to the younger brother and sister who want some retribution. The troubled brother is much older than the other siblings and is now working so he's open to the idea of taking an insurance policy out on himself as a way to make the brother and sister whole through a payment plan as opposed to an impossible lump sum.

How do we set it up best for tax purposes so the brother and sister get the proceeds at the time of his death? Should they be owners, bennies or what?

 

[DHK]

Just list list the brother/sister as beneficiaries. Also, you might want to list the brother/sister as an alternative mailing address, in case payments stop and the policy might be in danger of lapsing.

Life insurance proceeds are income tax free in most cases. Unless the brother has a large estate (doubtful), then you might need some trust/estate work done, but this doesn't sound like that is the case here.

 

[LGilmore]

You may have trouble insuring the brother if he has had financial problems.

 

[briko3]

List them as beneficiaries. Who's saying that he owes them any money at all? Is it just guilt over how things happened?

 

[WinoBlues]

Better have them owners ask well.

 

[DHK]

You may have trouble insuring the brother if he has had financial problems.

That's possible. Just find a carrier that will insure as long as he doesn't have an open bankruptcy case.

 

[rousemark]

You might ask yourself, "just how angry are the younger brother and sister?" This could result in a very quick claim!

 

[Cash]

It is amazing to me how the kid that actually takes care of the elderly parent is always the "bad guy" to the kids that show up a couple times a year and are the "heroines."