Survivor whole/life - second to die policy

Dec 29, 2018

  1. Dmully
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    Dmully New Member

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    I was asking the forum about the most efficient way to structure a WL policy then an agent suggested a survivor policy. The policy illustrates well for what we want to do and looks to be a lot less expensive. Was wondering if anyone has any thoughts on benefits or pitfalls. Seems like a good idea If the survivor does not need a pay out after the first death, which is our case. Penn seems to have a very good/flexible policy.
     
    Dmully, Dec 29, 2018
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  2. Robert Barney
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    Robert Barney Guru

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    The policy is based upon the cost of the least likely of the two insured people to die.

    As I don't know a lot about your situation, let me give you an extreme example.

    Let's assume you are a 65 year old male smoker, in standard health. A $1m pay to 121 no lapse UL policy would have an annual premium of $44,240 per year.

    Imagine you are married to a 60 year old female non-smoker, who qualifies for the lowest premiums because of her great health. The premium for the same type of policy would be $12,593 per year.

    $44,240 versus $12,593 per year.

    Now what is the best survivor premium for the 2 together. It should be lower than the the lowest of the premiums for a policy on either individual. You need to check that and see how much lower it is. If it is not that much lower, insure the person who is cheapest of the two.
     
  3. Allen Trent
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    Allen Trent Guru

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    2nd to die/survivorship life can be great for those clients that have no need for a death benefit when the 1st person dies & the surviving spouse will have the ongoing premiums to pay for the policy. think in terms of using it for Estate taxes or large taxes on retirement plans when the 2nd person dies, or to protect a special needs child or lastly in a Farm/Business situation where money is needed for 1 child who will continue the business to pay off the siblings that have no interest in the family business.

    However, I have seen some pretty bad uses of 2nd to die. Saw it used in a business buy sell agreement because it was cheaper. The problem is if 1 business partners dies, the other partner needs the money now to pay off the deceased persons family. 2nd to die doesnt pay when needed in that case, so cheaper didnt solve the problem.

    The other bad situation is when say a husband dies who had the bulk of the income. if the income drops, a pension drops & the soc security drop, would the surviving spouse have needed the money on his death. And, not only will that surviving wife have a large drop in monthly income, but she will still keep getting the bills for the 2nd to die policy in most cases. Again, for the very high net worth & very high income, it might be the right fit, for others it can merely be a cheaper policy that doesnt meet the need of the specific couple.
     
  4. Dmully
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    Dmully New Member

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    Thank you for your response. We are not very high net worth, however, after the first death, the surviving spouse will likely not be left in a bad economic situtation. This policy would be to ensure our kids are left something (if we elect to travel away our savings). When I was getting quotes for whole life on the individual basis - could get the same cash value and death benefit for half the price, so it made sense. Penn Mutual is the leader on the club house but will get some other quotes.
     
    Dmully, Dec 29, 2018
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  5. pfg1
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    pfg1 Guru

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    Surviorship policy is a legacy play mostly. Way different from the other illustration you posted. You might want to look at GUL and do it for BOTH you and the wife.
    Taking care of the surviving spouse FOR SURE, to me....that is more important that hoping everything will be ok and your kids will get something upon 2nd passing.
     
    pfg1, Dec 29, 2018
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  6. LGilmore
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    LGilmore Guru

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    were you just asking about cash value build up? A second policy is death benefit generator as it is designed to pay taxes at second death. Or your kids. if that's what you want.
     
    LGilmore, Dec 29, 2018
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  7. LGilmore
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    LGilmore Guru

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    Here's what I suggest since you are posting a ton and we really can't give you answers you can run with. Contact a local agent and ask what whole life mutual companies he represents. When you find one you like, sit down with them and play "what if" in front of their computing software. The stuff you are talking about might require 50 runs of the their programs. You may need to tweek things to review your options.

    Unfortunately and fortunately you have a ton of options in front of you. I get the feeling your looking for the magic one illustration and sorry there are dozens that could work for you. You would be best served by sitting down with somebody and seeing how your what ifs pan out.
     
    LGilmore, Dec 29, 2018
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  8. Allen Trent
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    Allen Trent Guru

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    While that has been traditionally true, I am beginning to see more application of max funded design for lifetime income distributions from 2nd to die cases. the idea is that if you believe you will need some supplemental tax advantaged income in retirement for both lives & either don't have other death benefit needs not already met, 2nd to die in a max funded design can work very well.
     
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