Posted on 02/18/2020 11:10:16 AM PST by Chickensoup
I have two children in my life. Because of circumstances I can give the children excellent properties, but I have little liquidity. The deal has been you care you get.
I realized if something happends to either of them, I am without enough liquidity to survive my old age.
I wonder whether I can or should insure them for enough money to care for me in case something GOD FORBID happens to them.
This is new territory for me.
Your thoughts?
I bought $25,000 whole life insurance policies for each of my kids when they were born. Cost me about $15 per month each. By the time they were old enough to buy a house, I had $8000 for each one of their policies in cash value that they used as part of their down payment.
I found in my early 40s and YEARS after my mom’s death, that my mom had taken out a policy on me almost at birth.
Sorry, that's a NO. Agents sell, that's what they do. They are going to tell you most anything to sell you.
Most financial gurus will suggest you put available funds in an index fund and it will outperform any insurance policy.
Source: Wife is an insurance agent.
I have worked in the life insurance field for 44 years.
I purchased 2 policies each (several years apart) on each of my 2 children for the purposes of (1) providing for cash, if needed, for their funerals, etc. (2) protecting their insurability, so they would have some insurance, even if their health deteriorated at a young age and (3) growing cash values, which might be used for a variety of uses (including to help fund my retirement, potentially).
The premiums on the oldest policies have been fully paid by policy dividends for maybe 10 years or more now, and the newer policies are almost to that point. The guaranteed cash values grow at guaranteed 4%, inside the policies (not taxable year to year).
If it seems I don’t need the values after I retire, I will transfer the ownership to the kids, and they can put their own spouses and/or children as beneficiaries. If either of them dies before I make that decision, I will share the death benefits with their spouses and/or children.
Oh really, even in a down market? That's nonsensical, most products have a place and it almost never makes since to put all your money in any single one.
I don’t believe you should take out life insurance policies on children. God forbid if anything ever happened to them, who do you think would be the #1 suspect?
I did something like that at the birth of each of my three sons. I bought a life insurance policy for each of them and also bought some T-bills for each or them. The T-bills were set to mature when they turned 18. That was enough for one of them to get almost entirely thru college (4 yr degree). The other two each had essentially 5 year degrees so they had to hump it for their last year or so but the extra cash gave them a good start.
smart
You must mean T notes or more likely T bonds or even zeros. T-Bills have a maximum maturity of something like 13 months.
One thing I might have done right over 30 years ago!! HA
good response. as a life agent, it seems the OP’s question is whether he can insure his interest in his kids managing his income producing properties, which duty they perform in anticipation of inheriting the properties.
So if they die, he will have to sell the properties or hire a manager. There may be a loss on sale or a reduced value when the properties are converted from an income stream to a lump sum. There would be costs for hiring a manager.
Are these insurable interests? Basically, the OP has a contract with his kids to manage property for future compensation ( inheritance ).
Thanks.
Yes, I think they are insurable interests. And even could be considered to be, without the properties, if he seriously expected that the kids would provide income/support to him in his advanced age. Maybe a bit tougher sell to an underwriter, but within reason, IMO.
You understood it perfectly.
We have planned a small in law in one apartment that, after I am gone will turn into a large family room.
If one of them dies, you sell the property you are “holding” for him, and use the proceeds to support yourself. (Otherwise, you have to put out extra money for an insurance policy and that increases the amount your children need to give you now.) Isn’t that what most people would do? Or am I missing something?
I was told that the kids have to purchase the policies each and pay for them and name me as the beneficiary in order to have the underwriter approve.
We put burial policies on both kids shortly after they were born, and they have them now upon leaving the nest, paid up, for their use if they wish, or to cash them in for cash value. But we protected ourselves and gave then the opportunity use them for themselves. Not a traditional gift, but one just the same.
It is also an investment. By establishing that the burial would be covered, they don’t fall into the cost changes that will happen in their lifetime. We had a burial policy like it for my wife’s father, and the argument was brief about increased costs over his lifetime for a paid up policy 35 years before the death. As long as the insurance company exists, they are bound by it. It’s a good investment for you and the kids.
rwood
I was told that the kids have to purchase the term policies each and pay for them and name me as the beneficiary in order to have the underwriter approve.
and that after I die, they could name each other or their families to be beneficiaries to the close of the term.
The sale of the properties in my lifetime would require costs of depreciation, and captial gains that would diminish the final amount.
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