Single Premium WL questions

[SParker]

I have been reading some of the older posts about SPWL,

Questions:

1) Do SPWL always MEC?

2) Why do people want SPWL? Just for the purpose of :

a) wealth transfer to beneficiaries in terms of a tax free DB and
b) for the purpose of LTC ?

Thanks

 

[Todd King]

Yeah, they will pretty much MEC out. It is about more than just the transfer. It's about turning $XX amount into a bigger amount.....way bigger than they will EVER get in a CD or such.

 

[SParker]

Yeah, they will pretty much MEC out. It is about more than just the transfer. It's about turning $XX amount into a bigger amount.....way bigger than they will EVER get in a CD or such.

Thanks. It looks like SPWL only makes sense if the goal is to transfer the wealth to beneficiaries because the DB on a MEC policy is still tax free. Correct me if I am wrong, there is no way for the insured to take tax free money out of a MEC policy during his/her lifetime. So even if we are able to turn $xx amount into a bigger amount, there will be a tax bite associated with it if the money is not transferred to beneficiaries.

Does anyone know if a SPWL has a chronic/terminal illness rider, will the advance be taxable given that it is a MEC policy?

 

[Allen Trent]

Thanks. It looks like SPWL only makes sense if the goal is to transfer the wealth to beneficiaries because the DB on a MEC policy is still tax free. Correct me if I am wrong, there is no way for the insured to take tax free money out of a MEC policy during his/her lifetime. So even if we are able to turn $xx amount into a bigger amount, there will be a tax bite associated with it if the money is not transferred to beneficiaries.

Does anyone know if a SPWL has a chronic/terminal illness rider, will the advance be taxable given that it is a MEC policy?

SPWL is a leave on discussion, not a live on the money discussion. So, distributions are not likely or planned, but would be for last resort.

Chronic illness distributions would be tax free as you are merely accelerating the death benefit like you do with a terminal illness rider. So, a claim payment on Chronic illness is really just a claim to receive some death benefit now.

If the policy is a LTC extension of benefit plan after accelerating the base policy death benefit, those LTC payments are tax free also. Note the regs give a max monthly amount that can be tax free which I currently think is just below 11k per month

 

[SParker]

@Allen Trent Great, thanks !

 

[scagnt83]

Yes, SPWL can be a good asset transfer tool. But it can also be a powerful tool for accumulating & utilizing assets while living. Basically its an annuity with an income tax-free DB... with a MUCH higher level of liquidity.

For a client that does not want an income rider and wants flexibility and control. A SPWL or SPIUL blows a traditional annuity away.

 

[pfg1]

Yes, SPWL can be a good asset transfer tool. But it can also be a powerful tool for accumulating & utilizing assets while living. Basically its an annuity with an income tax-free DB... with a MUCH higher level of liquidity.

For a client that does not want an income rider and wants flexibility and control. A SPWL or SPIUL blows a traditional annuity away.

Hey SC... good to see you, been a while!

As you mentioned, SPL can be good stuff. Everyone always thinks MEC is bad, not necessarily.

 

[scagnt83]

Hey SC... good to see you, been a while!

As you mentioned, SPL can be good stuff. Everyone always thinks MEC is bad, not necessarily.

Thanks man! Life is super busy these days. Running 2 different businesses now, new baby at home and everything else that is our so called life. But Im still around the forums, just dont participate as much as I used to!

 

[David Block]

There are a number of companies that offer SPWL whose main purpose is for LTCi. It is a quick way to transfer assets for future use. This can be done with a true SPWL as well as UL's that are specifically designed with long term care in mind. If your client has cash and the need for care planning, it is an excellent tool.

 

[pfg1]

Thanks man! Life is super busy these days. Running 2 different businesses now, new baby at home and everything else that is our so called life. But Im still around the forums, just dont participate as much as I used to!

New baby... awesome, congrats!