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Should I get out? Whole Life Insurance issues!
Old 04-08-2017, 10:42 AM   #1
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Should I get out? Whole Life Insurance issues!

OK - I am slightly embarrassed by the amount of insurance I got suckered into buying by my EX FINANCIAL ADVISOR , a Northwestern Mutual salesman. He no longer manages my taxable accounts, but back then I agreed to buying tons of Life Insurance. I have been making payments ever since and I feel nauseous the more I learn about these policies. Years and years of my money going to commissions, but not growing my cash value significantly. I know there are advantages, such as tax free growth and tax free income in retirement ( unless the law changes).

I'm 53, want to retire at 60, so I have 7 more years of payments on these crazy policies, although I am told I can cancel at anytime. There are 4 policies, only 2 of which have a positive cash value in excess of cost basis. I know I can cancel and take the cash value and invest elsewhere. Or stick it out and deal with the poor returns and then use the money in retirement for an income stream, which was my original plan.

I also have term and disability policies, which I would keep. The term policy is huge and would more than cover my family if needed, combined with my other assets.

Then there is the whole idea of having these policies in a Irrevocable Life Insurance Trust which is where they sit now. So, they are outside of my estate and provide assets that can pass easily to my heirs, and provides some degree of protection from potential creditors.

I don't know what to do- and I can't get an unbiased answer from my Life Insurance agent, I have to talk it over with my financial advisor. Anyone faced similar issues , and have an opinion on this issue?
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Old 04-08-2017, 10:58 AM   #2
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My wife and I each have a whole life policy with Northwestern. I am far from a life insurance expert but you might be in a "paid up" status where you do not have to pay monthly premiums any longer and still maintain the face values and the cash balance still increases.

You might want to call Northwestern directly for more info.
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Old 04-08-2017, 11:06 AM   #3
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Originally Posted by golfnut View Post
My wife and I each have a whole life policy with Northwestern. I am far from a life insurance expert but you might be in a "paid up" status where you do not have to pay monthly premiums any longer and still maintain the face values and the cash balance still increases.

You might want to call Northwestern directly for more info.
Thank you - that's a good idea.
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Old 04-08-2017, 12:35 PM   #4
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If the policies are truly in an IRREVOCABLE life insurance trust, then the policy belongs to the trustee and you don't have access to the cash value (and they aren't available for the retirement cash flow you planned on). My recommendation would be to get the policies converted into paid up policies (for a lesser amount of death benefit) and know that the $$ are available to the trust beneficiaries. generally you can take policies with significant cash value and do an exchange for a policy with a lesser death benefit, but is fully paid up. Also, look at other companies for the new policies as long as there are no underwriting issues as Northwestern is somewhat more expensive than other companies.

This is a problem with insurance salesmen (and saleswomen). They sell the policy as a retirement product, and when the policy is about to be put into place they add the recommendation to avoid the estate tax by putting the policy into a trust. Now the assets are out of your reach, but they don't tell you that!
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Old 04-08-2017, 01:50 PM   #5
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Originally Posted by Taxman59 View Post
If the policies are truly in an IRREVOCABLE life insurance trust, then the policy belongs to the trustee and you don't have access to the cash value (and they aren't available for the retirement cash flow you planned on). My recommendation would be to get the policies converted into paid up policies (for a lesser amount of death benefit) and know that the $$ are available to the trust beneficiaries. generally you can take policies with significant cash value and do an exchange for a policy with a lesser death benefit, but is fully paid up. Also, look at other companies for the new policies as long as there are no underwriting issues as Northwestern is somewhat more expensive than other companies.

This is a problem with insurance salesmen (and saleswomen). They sell the policy as a retirement product, and when the policy is about to be put into place they add the recommendation to avoid the estate tax by putting the policy into a trust. Now the assets are out of your reach, but they don't tell you that!

Well that would be a MAJOR issue ...
I am the Trustee for my wife's Trust , and she is the Trustee for mine. I sure as heck hope that allows us access to our own money. If not, then I will have to stop funding these and convert to a paid up policy.
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Old 04-08-2017, 02:00 PM   #6
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Quote:
Originally Posted by NJSail View Post
OK - I am slightly embarrassed by the amount of insurance I got suckered into buying by my EX FINANCIAL ADVISOR , a Northwestern Mutual salesman. He no longer manages my taxable accounts, but back then I agreed to buying tons of Life Insurance. I have been making payments ever since and I feel nauseous the more I learn about these policies. Years and years of my money going to commissions, but not growing my cash value significantly. I know there are advantages, such as tax free growth and tax free income in retirement ( unless the law changes).

I'm 53, want to retire at 60, so I have 7 more years of payments on these crazy policies, although I am told I can cancel at anytime. There are 4 policies, only 2 of which have a positive cash value in excess of cost basis. I know I can cancel and take the cash value and invest elsewhere. Or stick it out and deal with the poor returns and then use the money in retirement for an income stream, which was my original plan.

I also have term and disability policies, which I would keep. The term policy is huge and would more than cover my family if needed, combined with my other assets.

Then there is the whole idea of having these policies in a Irrevocable Life Insurance Trust which is where they sit now. So, they are outside of my estate and provide assets that can pass easily to my heirs, and provides some degree of protection from potential creditors.

I don't know what to do- and I can't get an unbiased answer from my Life Insurance agent, I have to talk it over with my financial advisor. Anyone faced similar issues , and have an opinion on this issue?
Can you share your NEED for life insurance. i.e., If you (God forbid) died tomorrow, who or what financial need would the insurance death benefit be required to answer?
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Old 04-08-2017, 03:38 PM   #7
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I would think it would be Revocable A B Trust
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