I visited my mother today, and we called Prudential about the whole life policies. As I was sure, she was mistaken. I knew she couldn't owe $24K in taxes on a $39K surrender policy. It was $24K taxable. She's been paying her $600/year on the policy, racking up those monstrous 3% dividends since 1966. What a scam. And the policies were sold to her by her trusted insurance agent, my uncle (her brother). He's 84 and not all there now, so you can't really get mad at him. It just goes to show how the agents can convince themselves that they are really helping their clients while they are actually helping themselves.
Anyway, I doubt if she had gotten term she would have invested the difference, so maybe this worked out for the best. The money will be there if she needs it in the future. Otherwise it will pass to me tax free. I don't need it, and maybe I'll do the "buy the policy" thing from her, giving her cash now. I'll need to figure out how to word it so she doesn't get her dander up.
"Good judgment comes from experience. Experience comes from bad judgement." - Will Rogers
DW and I - FIREd at 50 (7/06), living off assets