Single Premium Whole Life/GUL for 86 year old

Jul 16, 2019

  1. paulallred
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    paulallred Expert

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    Anybody have a carrier or two in mind? Could backdate to age 85 but he was born 1/26/1933 so its going to be a tight timeline.
    I have a 165,915 db from Cincinnati Life for his $150k 1 Pay
     
  2. pfg1
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    pfg1 Guru

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    To me it doesn't make sense to give up liquidity use and control of $150k to get $15k more at some point down the road. Unless the client has piles and its a tax play, most times I've seen once they are in the 80's a new life policy doesn't make sense.
     
    pfg1, Jul 18, 2019
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  3. Allen Trent
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    Allen Trent Guru

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    Really doesn't seem like a suitable case for those ages that I have seen. Because of the upfront costs of carriers to underwrite, pay commission, reserve for & invest the money they cant offer much leverage in the death benefit because of the very short window of time in which they will have the policy active with such a short life expectancy.

    then, on the client side, unless you go with a carrier that allows half or more of the money to be liquid, you are asking for trouble liquidity wise considering the possibilities the client will have to possibly tap funds for medical, nursing home care or Medicaid spend down. with all the money trapped in the base SPWL policy, you only have 2 choices: BORROW: which wont go over well with client or their POA at the time or FULL SURRENDER. Lastly, many carriers at these ages have sizeable up front load in terms that the CV goes backwards pretty hard, meaning you have also taken their asset backwards if needed that may take 4, 6 or more years to get back to the $150k they deposited

    The carrier I work with puts 75% of the money in the liquid PUAR & 25% in the Base SPWL. However, they don't permit backdating to save age on a SPWL because it is a bad financial move to back date a SPWL considering you are moving the policy anniversary forward causing Dividends & base policy interest to credit so much sooner if back dated. Bummer cause $150k for 85 male would provide $194k of face & 75% of the CV liquid in PUAR



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  4. paulallred
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    paulallred Expert

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    Hi Allen, thank you for your thoughts.
    It's one of my Agents cases and if he doesn't put the money into a life contract his beneficiaries will be taxed on the $150,000 at their much higher tax brackets, therefore it makes for a great case.
    So what carrier and product are you displaying in you message?
    Minnesota life's WL I found out issues to age 90
     
  5. Allen Trent
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    Allen Trent Guru

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    I believe you are wrong about your point about the beneficiaries being taxed on $150k. If the client currently has $150k in an after tax investment such as a bank account, CD or even stocks-mutual funds-land, the beneficiaries wont owe any income taxes. Bank type money has been taxed to the owners while alive, so the beneficiaries owe no income taxes at death. On items like stocks-mutual funds-land, those are capital assets that get a step up in basis & the beneficiaires owe no income or capital gains tax on the inherited value

    If the $150k is currenlty in an IRA or annuity, the owners will have to report the $150k of the IRA money or if NQ annuities, the deferred gains on their tax return now, thus losing a lot of money by adding 150k to their tax return now, exposing their SS checks to greater taxation & possibly owing more for their Medicare premiums. It is rarely advisable for any client, let alone an 85 year old to cash out qualified funds at 1 time to buy SPWL. In some case, a NQ annuity could be cashed out if the taxable gain wont be too much & they gain some nice leverage from a SPWL, but even on those you need to walk before you run and get the entire tax picture lined up

    If you reason is tax free in this case, you are mixing up your tax knowledge & you would really not want to go the route of SPWL if this is your reasoning.

    BTW, the carrier on the illustrations is a 1 state company that has captive multi line agents, so the product isnt accessible to other agents to sell
     
  6. paulallred
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    paulallred Expert

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    I never mentioned where the money is, his CPA told him the best strategy was to place it in a life insurance policy.
    You have made many wrongful assumptions.
    You;re also being intentionally evasive by not divulging who the carrier and product are.
    Unless you had a direct answer (a carrier that had coverage for a 86 year old) then you need not reply at all.
    An application has been taken as of yesterday as requested by hid CPA.
     
  7. Allen Trent
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    Allen Trent Guru

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    I am sorry. I am not trying to be critical or evasive. I am just telling you that your comment about putting it in a life policy will make the money tax free. I am 100% certain that cannot be true as the money is already someplace that is also tax free or the money has to be liquidated from an account that is taxable such as a qualified plan or NQ annuity, both of which will trigger large amounts to be reported as taxable to the owner to get it in the form of cash to buy the SPWL.

    The reason I sent the illustration for an 85 year old was merely to show that for suitability reasons & liquidity, it is best to have as much money as policy go into a PUAR fund in case they need to access the funds unexpectedly or for nursing home costs or Medicaid spend down.

    get it in writing from the CPA so you are protected, otherwise you could face some problems as many are facing with elder abuse departments in each state or insurance divisions.
     
  8. paulallred
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    paulallred Expert

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    It does make it tax-free and more tax efficient than where it is and the proposal is created and signed by the CPA.
    You still haven't named the the carrier or product you illustrated...
     
  9. Todd King
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    Todd King IMO/FMO Owner

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    There could be an inheritance tax if it is not in a life policy. Depends on the state.
     
  10. Allen Trent
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    Farm Bureau of Michigan.

    It doesn't make their $150k more tax efficient. it has to either be cash now or become cash to get into SPWL. cash is already tax efficient. So, the only potential benefit is the small lift of the net amount at risk, the extra $15,000 of death benefit provided by the $150k being put in. But if the client held the $150k in a 2-3% CD or municipal bond or annuity, those accounts would grow past the $165k SPWL face amount in about 4 years & thus surpass the benefit of the tax free on the extra $15k of death benefit.

    So, you are tying up the persons money in an illiquid account that goes backwards in cash value for several years where the only possible benefit is if they die in the next 3-4 years. but if they live past that period, it is worse or if they need the money from the account it is worse.

    Listen, I love SPWL & an a huge fan of it & have been involved in tens of millions of dollars placed into SPWL. I promote it every day & believe more seniors should have more of their lazy money in SPWL, but this just sounds like a square peg is being put into round hole & the repercussions from it wont be known until you may face them.
     
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