Home › Forums › Financial Markets/Economics › ot: whole life; estate planning; death…
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UCGal.
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February 23, 2014 at 2:53 PM #20977February 23, 2014 at 5:13 PM #771195
svelteParticipantWe took the following approach:
– when we were young, we always had enough term life insurance to pay off the house and give my wife a little cushion should I die. That way all she would have to earn is enough for food, utilities, and maybe a car payment. (I wanted it to be her choice if she remarried, not something she needed to do to survive)
– as we get older, we reduce our dependency on the term life since our 401K and other retirements have grown, and our mortgage amount has dropped. We still have term life, though I imagine it will end when we are in our 60s somewhere….about the time our mortgage disappears. 🙂
Our colds have been harsher the last few years and recovery periods longer too. We’ve attributed it to growing older in general and having grandkids running around also.
February 23, 2014 at 6:05 PM #771197bob2007
ParticipantIt can depend on your income as well. If you make too much to contribute to a roth, and don’t have a 401k, your left with contributing to a non-deductable traditional ira. Some whole life plans will provide a minimum return guarantee, like 5%, with the additional advantage that it grows tax free.
Fees are higher (and hidden) in a whole life plan, so most people say to go with term plus your own investments. I treat the whole life as the lower risk part of my retirement planning.
February 23, 2014 at 6:08 PM #771199
CoronitaParticipant[quote=bob2007]It can depend on your income as well. If you make too much to contribute to a roth, and don’t have a 401k, your left with contributing to a non-deductable traditional ira. Some whole life plans will provide a minimum return guarantee, like 5%, with the additional advantage that it grows tax free.
Fees are higher (and hidden) in a whole life plan, so most people say to go with term plus your own investments. I treat the whole life as the lower risk part of my retirement planning.[/quote]
Interesting. Not that I can participate anymore, but care to share what folks are looking at in terms of fees, and examples of hidden fees?
February 23, 2014 at 6:08 PM #771196CoronitaParticipantWhen I was 30, I ended up getting term life for 20 years starting on my own for about $ 1/2mil.
Things were cheap then… Before all the health things, which basically makes me pretty much uninsurable from a life insurance perspective. So I sort of regret not getting more insurance when things were cheap and obtainable…
Just in case…I figure…My employer(s) typically paid for life insurance up to 2x my salary…And then I contribute to a voluntary life for another $200k up to the maximum without requiring any sort of health exams…
My view on life insurance was that I was only planning on having one as a “stop-gap” measure until I accumulated enough wealth and my 15 year primary mortgage is done (which hopefully won’t matter soon with passive income elsewhere covering the mortgage)
Some folks have mentioned to me it’s a good vehicle to pass on some of your net worth to your kid(s)… I haven’t looked into much of it yet….I tried to understand the entire whole life and variable annuity and it was way to complicated for my brain at the time to the point that I didn’t feel comfortable doing something I didn’t understand… But I’m sure there’s a benefit if you figure it out… It’s sort of a moot point for me now, since well, insurance companies wouldn’t want to touch me now…lol….
February 23, 2014 at 7:17 PM #771202ljinvestor
ParticipantIf you do go with Whole Life, find a solid company that offers a high early cash value product. Not sure if they all offer but look into companies such as Mass Mutual, New York Life, Guardian, MetLife.
Usually less fees/surrender charges and greater accumulation in early years in case you change your mind. Agents don’t get paid near as much on these high early cash products but better for client as it provides more flexibility
February 24, 2014 at 6:21 PM #771221joec
ParticipantHaving worked in an insurance office which offered these products, you really have to see why you’re even talking about whole life insurance. We also looked at things like Generational trust, ILITs (Irrevocable living trusts), estate planning issues, etc…
First thing is, insurance is NOT an investment. For 99% if the people out there, you probably don’t need whole life and most people are trying to rip you off.
Commissions can be as high as 8% I think…been a while, but generally, the carrying cost of all these products would be more than what a separate insurance and investment portfolio will be. A lot of them are also poor investment instruments as well.
There are now some no-load annuities as well, but again, I think people should ask why they even need to complicate things.
As an attorney, you may want to just talk to a fee-only financial planner or interview a few and see what their take on it is and what they can do for you and your family/kids/legacy planning if you have the assets, etc…
A common thought now is also to never pass wealth to kids directly and leave it in trust forever/as long as possible in case your kids marry a whack job, gets divorced, etc…
Life insurance is used in a lot of estate planning because estate taxes used to be very bad with having to do A/B bypass trust so both spouses can take advantage of the lifetime exemption, etc…but the laws have changed recently as well…
Simple idea was just that the wealthy person would pay for the permanent insurance, then when they die, the life insurance will pay out the death benefit so you can use that to pay the estate tax. This is more flexible since some people might not have the cash, have non-liquid assets, a business, property, etc so families wouldn’t have to liquidate upon a death…Some tax benefits too since these accounts tend to defer income and if I recall, the death benefit is tax free, but it’s not really used for that I don’t feel…
If you have a large amount of assets, you really need to just talk to a planner and run the numbers…as well as an estate attorney.
February 24, 2014 at 6:26 PM #771222scaredyclassic
ParticipantScratch whole life …
February 24, 2014 at 10:34 PM #771235CDMA ENG
ParticipantWe went through this exercise a year ago… I asked the same question…
Result… Get Term…
Even the guy I bought whole life from finally admitted that for a investment it was a pretty poor choice.
I have two terms… one through Northwestern and the other through work.
Depressing… I am worth far more under a bus than riding in it.
CE
February 25, 2014 at 5:29 AM #771237Participant[quote=CDMA ENG]We went through this exercise a year ago… I asked the same question…
Result… Get Term…
Even the guy I bought whole life from finally admitted that for a investment it was a pretty poor choice.
I have two terms… one through Northwestern and the other through work.
Depressing… I am worth far more under a bus than riding in it.
CE[/quote]
Generally agree…the estate tax exemption has gone up over the years and again, unless you are worth upwards of 3-5 mil (I forget the number exactly since I’m worth nowhere near that and it won’t affect me currently), you probably won’t get much/any benefit from any of the permanent insurances. If you are worth a LOT though, definitely talk to someone who is fee based/hourly and figure out what will happen to you/assets if you have more than you will need in your lifetime.
I get asked this question from time to time from family/friends having worked in the industry before and a lot of it is almost meant to purposely confuse/complicate the situation for most of the 99% folks.
Should still look at a trust if you own housing in CA, durable power of attorney for finances I think it’s called, the medical directive thing, etc…
February 25, 2014 at 7:18 AM #771239Participant[quote=CDMA ENG]We went through this exercise a year ago… I asked the same question…
Result… Get Term…
Even the guy I bought whole life from finally admitted that for a investment it was a pretty poor choice.
I have two terms… one through Northwestern and the other through work.
Depressing… I am worth far more under a bus than riding in it.
CE[/quote]
Opps… I meant bought term life from… but I was in conversation about upgrading to whole…
February 25, 2014 at 7:20 AM #771240Participantit’s particularly odd purchasing a term life policy that will expire on or around the date of one’s father’s death.
February 25, 2014 at 11:34 AM #771248UCGal
ParticipantWe did an approach similar to what’s mentioned above.
We started with a larger term policy – but as we’ve been paying down the mortgage, we’ve been reducing the size.
My husband is retiring soon/semi retired – so we need less insurance on him. I still have a couple more years of working – so we need more insurance on my for income replacement.
We also factored in loss of passive/benefit income (lost SS, etc.) and how that impacts our income streams if someone dies sooner… so we’ll maintain small policies for a while – till we no longer have to worry about loss from these income streams.
But always term. I’m very fee adverse and whole and universal life have so many fees, are so complex, and have things that I rub me the wrong way like surrender charges. I’ve never liked them.
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