MetLife - Life Paid-up at Age 98

[cbruce15]

If you look at the return year over year at this point (and going fwd) he's exponentially growing any $ he pays in, and it comes out tax free...and doing it with no risk.

Should the equity addition be variable with market risk? I do not have the most updated report from 2018 to 2019. Not sure how is the performance in Q4 2018.

 

[cbruce15]

Is this you or your uncle who has this concern. What do his children think. I know I'd not be too happy if my cousin were trying to talk my dad out of his cash value life insurance policy.

My uncle does not want his children to deal with this policy. He does not want to create any conflict between his children. I work for financial related firm, so he seeks my help to understand this policy. He paid this policy for 17 years and just feel a bit tired for a 70s old man to keep paying $25,480 annually. I do my best as a family member to do some research for him. No any other intention, no benefit. My cousin should not be unhappy about what I did.

 

[Tahoe Ray]

My uncle does not want his children to deal with this policy. He does not want to create any conflict between his children. I work for financial related firm, so he seeks my help to understand this policy. He paid this policy for 17 years and just feel a bit tired for a 70s old man to keep paying $25,480 annually. I do my best as a family member to do some research for him. No any other intention, no benefit. My cousin should not be unhappy about what I did.

If you're in a financial related capacity, then look at this like a planner.

If your uncle died tomorrow, he'd have a tax-free IRR of 13.2%. Now, that will go down over time but you'll be hard-pressed to find a better pure estate strategy in terms of net returns than permanent life insurance.

You can look to reduce the out of pocket but the death benefit will not grow like it has.

This was a solid option/good decision by your uncle if legacy is his goal.

 

[Allen Trent]

and just feel a bit tired for a 70s old man to keep paying $25,480 annually. I do my best as a family member to do some research for him.

In my 20+ years in the business, I have never seen a person that is paying $25k per year that didnt have very sizeable other assets such as IRAs, Annuities or Brokerage accounts. So, with that in mind, I am sure he is like me & doesnt like "paying" bills no matter what kind of bills they are.

However, if he does have (and I bet he does) have things like IRAs, CDs, annuities or brokerage accounts, help him to see that the RMDs he must take from the IRAs that he doesnt spend can be used to pay into the life--not because it is a bill that must be paid, but why not leverage those RMD checks that must come out of the IRA

Same for if he has NQ annuities. Those may be gaining each year tax deferred, but his heirs will have to pay taxes on the gains. Why not peel off some of the credited interest every year to leverage it & pay those insurance premiums that are creating a multi-million dollar tax free asset for his heirs.

IF IRA RMD or Annuity interest not enough to pay 25k per year, why not use the Dividends he is likely being taxed on in his brokerage account that are merely buying more shares of stock or bonds. Those dividends could leverage to pay the insurance premiums

If all the above still not enough to cover the 25k each year, why not use some of the excess bank CD, money market money that is being reported as taxable each year & only making 1-2% interest to leverage & pay those premiums.

Now, if he is still paying 25k & has none of these assets and is skipping prescriptions & meals, you have a different issue.

All these monies, whether sitting in a bank account, an IRA, an Annuity or a brokerage account are still his assets in terms of cash, but the insurance will be the most welcom by his heirs because of the leverage & tax free nature.

If he wants to come to Michigan and is healthy he could transfer the cash value to a single premium whole life that would be around $1M that wouldnt require additional premiums. But I think that would be a very dumb move if he can afford to keep making those premium payments from his excess income or the other assets I mention above.

 

[Tahoe Ray]

In my 20+ years in the business, I have never seen a person that is paying $25k per year that didnt have very sizeable other assets such as IRAs, Annuities or Brokerage accounts. So, with that in mind, I am sure he is like me & doesnt like "paying" bills no matter what kind of bills they are.

However, if he does have (and I bet he does) have things like IRAs, CDs, annuities or brokerage accounts, help him to see that the RMDs he must take from the IRAs that he doesnt spend can be used to pay into the life--not because it is a bill that must be paid, but why not leverage those RMD checks that must come out of the IRA

Same for if he has NQ annuities. Those may be gaining each year tax deferred, but his heirs will have to pay taxes on the gains. Why not peel off some of the credited interest every year to leverage it & pay those insurance premiums that are creating a multi-million dollar tax free asset for his heirs.

IF IRA RMD or Annuity interest not enough to pay 25k per year, why not use the Dividends he is likely being taxed on in his brokerage account that are merely buying more shares of stock or bonds. Those dividends could leverage to pay the insurance premiums

If all the above still not enough to cover the 25k each year, why not use some of the excess bank CD, money market money that is being reported as taxable each year & only making 1-2% interest to leverage & pay those premiums.

Now, if he is still paying 25k & has none of these assets and is skipping prescriptions & meals, you have a different issue.

All these monies, whether sitting in a bank account, an IRA, an Annuity or a brokerage account are still his assets in terms of cash, but the insurance will be the most welcom by his heirs because of the leverage & tax free nature.

If he wants to come to Michigan and is healthy he could transfer the cash value to a single premium whole life that would be around $1M that wouldnt require additional premiums. But I think that would be a very dumb move if he can afford to keep making those premium payments from his excess income or the other assets I mention above.

You know your stuff, Allen. Glad to have you on the forum.

 

[Allen Trent]

You know your stuff, Allen. Glad to have you on the forum.

Just good at the Google.......

 

[Tahoe Ray]

Just good at the Google.......

Write all of that on your website expanded with examples and you'll probably be ranked #1 for the OPs questions in a few months.

 

[cbruce15]

In my 20+ years in the business, I have never seen a person that is paying $25k per year that didnt have very sizeable other assets such as IRAs, Annuities or Brokerage accounts. So, with that in mind, I am sure he is like me & doesnt like "paying" bills no matter what kind of bills they are.

You got it Allen. $25K is affordable for my uncle, but he just feels this policy like a endless bill, so he wants to know if it is ok to stop.

Thanks for all your info. This policy performs well and it seems a great tools for estate planning. However, my uncle has not thought that far. His biggest concern is if he needs to keep paying premium, so I need to get this answer first. After that, we will discuss about this policy may be a good tool for his children to inherit his assets without paying income tax, but this portion is not his big concern.

 

[Lloyds of Lubbock]

This policy has cash value of adds close to $250k.
Using his dividend plus surrendereing additions, he should be able to offet this premium.
You should get a comparison to an RPU.
Remember if you go rpu you are done.
This is not always so great, I have become uninsureable so I have taken my policies of offset and continued premium to boost the death benefit.