Selling Life Policies

[Justin Bilyj]

musta missed that part...on another hand about 1035,

I remember hearing the owner of TGP forums claim there were a couple of life insurance companies that allowed 1035 of the basis in term to a new life contract due to the clause not specifying the cash value is what is 1035ed (or to that effect)...

 

[VolAgent]

musta missed that part...on another hand about 1035,

I remember hearing the owner of TGP forums claim there were a couple of life insurance companies that allowed 1035 of the basis in term to a new life contract due to the clause not specifying the cash value is what is 1035ed (or to that effect)...

What he is doing is moving the cost basis. A technique to cause the new policy to have a higher basis than it otherwise would and allowing more withdrawals later on before having to switch to loans.

I really don't see how that would help here, as they are wanting to get value for the current life policy, not increase the apparent cost basis for the LTC policy.

 

[DHK]

Mr. Ed - you completely missed the point of Moonlight's question.

In social security planning, when two spouses will be receiving benefits... and one dies... the surviving spouse will receive the HIGHER of the two benefits... but not both.

That's another reason why spouses should hold on to life insurance on each other - to protect their retirement income stream.

 

[tlmarketing]

If the clients are age 75 plus and policies still offer conversion privilege, maybe there is a market depending on their life expectancy.

If younger than age 75, they need to have significant health issues in order to have a chance at selling policy.

 

[scagnt83]

I have a lot of clients who are at that stage in life where they don't need their life insurance anymore.

Most of them have term policies that have at least $250K in death benefit.

They have no debt, they are retired and they are cancelling their life insurance and buying ltc insurance (from me) instead.

would it make sense for them to sell their life insurance policies?

if so, what do I need to ask them to find out if their policy is "sellable"?

any help would be appreciated.

thanks.

sao

One of the largest growing segments of the life industry are baby boomers who's term policies are expiring but still see the need to continue life insurance. I would question that high of a rate of "no need" for life insurance.

The more likely scenario is that they have a lower need for life insurance. Maybe not for the spouse's needs, but often it is for the kids to help with taxes/probate costs/final expense costs/etc.

So I would highly consider converting some of those term policies. Probably not the whole policy, but you can convert whatever % you want to over to permanent (such as a GUL). They might not need $500k anymore, but $100k might be very helpful for the kids if the clients have a decent amount of assets (obviously most will since they are buying LTCI).

Also it depends on what the assets are. Do they have direct beneficiaries on most or do most pass through probate? Taxes dont wait for Probate to settle or for property to sell or for a business to be bought out.
How much in taxes will they create for the heirs? Will the increased income put them in a higher tax bracket?
At the very least the kids most likely need a small policy to help with immediate final expenses. Even an IRA takes longer than the funeral for ownership to transfer over to a bene.


As to selling the policies, you can only sell a Permanent Policy. No settlement companies will buy term. There is a life settlement section here on the forum still I think, so check there for firms to work with. But basically the younger someone is the less they will get... often they dont even work with people under 70 unless there is an underlying medical condition (im not an expert on life settlements so take that very last statement with a grain of salt)

 

[Mr_Ed]

Mr. Ed - you completely missed the point of Moonlight's question.

In social security planning, when two spouses will be receiving benefits... and one dies... the surviving spouse will receive the HIGHER of the two benefits... but not both.

That's another reason why spouses should hold on to life insurance on each other - to protect their retirement income stream.

i understood his point.
i know how social security works when one spouse dies.

i was short with margaritaville because he assumed I didn't know how it works and answered my question with a question to which i already knew the answer.

 

[Justin Bilyj]

I really don't see how that would help here, as they are wanting to get value for the current life policy, not increase the apparent cost basis for the LTC policy.

Not saying it would help, I just wanted to point that out to steer the conversation off track...

 

[moonlightandmargaritas]

i understood his point.
i know how social security works when one spouse dies.

i was short with margaritaville because he assumed I didn't know how it works and answered my question with a question to which i already knew the answer.

Looks like reading comprehension is a bit of a challenge for you.

I didn't assume anything. I asked if your clients took it into consideration before canceling their policy. Nothing more, nothing less.

 

[VolAgent]

Not saying it would help, I just wanted to point that out to steer the conversation off track...

Ah, in that case....

How about them Browns?

 

[Justin Bilyj]

This year is the one!!!!! Lol