Posted on 01/29/2022 2:49:51 PM PST by nickcarraway
Does second-to-die insurance create a tax bonanza? Not exactly.
“I’m thinking about a second-to-die policy that would pay off after my wife and I are both gone.
“Here's some proposals the agent came up with, based on gifting premium dollars to a trust owned by the two boys. I need to work through all the tax wrinkles, but ultimately it’s a series of bets, most importantly that we both die after one premium and the boys stick it to the insurance company for the full death benefit. After that the payoff diminishes in magnitude.
“Would love to hear your thoughts if you dive into it.”
Dan, Connecticut
Second-to-die: the marvelous insurance policy that magically creates a tax-free payoff to your kids. They can use the money to pay death taxes on the rest of your assets.
Except that the timing of the payoff does not align with what your family needs. Also: The tax-free benefit turns out to be not so magical. Also: Future premiums are a little murky.
These policies, sold to a couple nearing or in retirement, have a death benefit that is activated only when the second parent is deceased. Second-to-die is such a mouthful. Can I just say that what the agent wants you to have is an S.T.D.?
At first blush the S.T.D. tax exemption does look quite powerful. One element of it is that a life insurance policy’s death benefit does not constitute taxable income. Thus, if you take out a $1 million policy and pay one $10,000 premium, and the next day get pushed onto the subway tracks, your heirs make a $990,000 profit but don’t pay income tax on that profit.
(Excerpt) Read more at forbes.com ...
” you’re on my no Fly Zone List marked as “unreasonable and can’t be reasoned with”.”
That’s just typical censorship by a liberal when they realize they cannot win an argument after they say something really stupid. Fakebook, Twits, all you liberal censors like to stop the truth.
Of course, on average, insurance pays out more than it got in premiums.
That’s as simple an equation as one needs to know.
I worked in insurance for nearly two decades. The overhead the companies have eats up over 35% of your premiums, on average. No purchaser will ever get that benefit back.
That is, “insurance pays out LESS…”
Crud.
“Then you know that term insurance is an expense, not an “investment”. Only a fool thinks of it that way.”
So, when it pays out more than you put in, does that change it to an investment? What you just said makes no sense and is contradictory.
Based on a pretty arduous experience with a close relative’s estate I had to liquidate, I suggest:
1. Make the insurance policy part of the estate and have the proceeds of the policy payable specifically to the estate as its beneficiary.
2. Include specific instructions in the Will about how those insurance proceeds are to be disbursed.
3. Make the face value of the policy sufficient to pay not only the probate fees and taxes but also all the other costs associated with administrating the distribution of the estate’s assets. This includes getting any property ready for sale, bond fees, preparation and mailing reports to the courts (along with associated filing fees), overhead costs associated with running the estate (electricity, Wi-Fi, lawn service, security service), etc. Work this out with an estate planner then add a healthy contingency margin to it.
(The relative I was administrator for was intestate (no effective will) and single with a living parent (very elderly mother with dementia). So the probate situation took some sorting out. Hopefully, your situation will be a simple, within the immediate family transfer of property.)
Best insurance is to move yourself and assets to a state where they aren’t taxed.
Can also investigate starting a family trust. If you live in the states of Washington or Oregon, I know the best estate planner and CPA in the area.
Q: What is the purpose of insurance?
No, that’s a gamble.
Excellent advice!
Go away Brainless Toad and take your sad-life vitriol with you.
You are a complete and utter waste of time Brainless Toad.
Don’t be patronizing.
You’re not nearly as clever as you think.
“You’re not nearly as clever as you think.”
Well, gosh, if YOU say so.
Rather than buying a whole life insurance policy, a young head of household is far better off purchasing term life insurance to protect his children while they are dependent upon him and investing the money saved for his own account.
Are you a registered investment advisor or a Dave Ramsey fan?
I have a thirty year term policy that expires when I’m 74. If I don’t expire before then I’m going to be very irritated that I wasted 30 years of premiums.
“ Answer: Insurance is a bet against yourself.”
Maybe. But please explain how your financial obligations and family survive if your gone and they have no income?
That is good practical advice for those without estates sufficiently large to pay estate taxes (currently most people). If you might have to pay estate taxes you don’t want to own the policy or have the proceeds payable to your estate because those proceeds will be subject to estate tax.
Set up your estate and trust to take care of all of that.
You care about you much more than anyone else cares about you so you’re the one to set things up in the most cost-effective way that is best for the benefit of you and yours.
I’m just a regular guy with a reasonable amount of common sense.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.