Need advice on whole life policy NOT MINE

[GladToBeFree]

My wife's aunt (by marriage to her uncle) is starting to decline due to dementia. She has a couple of whole life insurance policies. She is needing income to pay for care now. ,

No one in her family wants the responsibility of a power of attorney. My wife is the only one who really is interested in helping her. Her blood relatives do not want to step up to helping her. She has some assets so she can pay for her care for a while.

Question is how to best cash in the whole life policy so we get some funds to support her without leaving anything for the undeserving family.

 

[RunningBum]

They should be giving a yearly statement which includes the cash value, and you should be able to contact the insurance company for her to get the money and close out the policy.

You can also take a loan out against a % of the cash value you have in the policy. That works in a situation where you don't want to cancel the death benefit, but it doesn't sound like you care about that.

I guess there's a way to sell your life insurance policy. I have no idea which kinds of policies you can sell, and whether it's a good idea or bad.

You might have to be careful here in all cases. Does your wife have POA? The blood relatives could sue under grounds that she is not competent to make such a decision. POA would probably cover that and it seems clear that it's the right thing for the aunt.

Are you looking into Medicaid for when she runs out of money? I don't know if life insurance is considered an asset in that case, or if she could qualify for Medicaid and still hold the policy, but since you don't care to leave insurance proceeds for the others, that doesn't sound like a priority.

I got quickly out of things I know to things I only have a vague idea about. I think most communities or states have advisors on elder financial issues like this. Hopefully someone here has dealt with that and can say more. I'd be looking to start there to figure out all of your options.

 

[ivinsfan]

Well I'm sure the blood relatives will step up with lots of opinions and questions when your wife starts moving around her Aunt's assets.



Yes to it's too late now to get a POA and honestly I wouldn't touch this with a 10 foot pole. Run and hide. If the Aunt goes to a care facility let them call in social services to look after Aunties money.

 

[pb4uski]

You need to find out who the beneficiaries are. Also, is there's still a premium on these policies or is the premium being paid from dividends?

Best bet would probably be to borrow from the policies... as I recall you can borrow up to 90% of the cash surrender value.

Then when she dies the beneficiaries will receive the excess of the death benefit over the policy loan tax-free.

 

[CRLLS]

One possible other option is for her to annuitize the policy so she can get a monthly income. This is not converting the policy to an annuity. Old Whole life policies may have a guaranteed amount that is higher than closing out the policy for the cash value and then buying an annuity. Asking the company will not necessarily get you the best answer. Read the policy in detail. And don't accept the first or 2nd answer they may give if the policy says differently. I went thru this on my 40+ year old policy with MetLife.

 

[GladToBeFree]

Thanks to all that responded. The blood relatives don't want a thing to do with becoming responsible in any way. They refused to get POA. My wife went to a local attorney who she went to school with and got the POA. Her aunt isn't completely gone, she's just somewhat forgetful and gets confused easily. This came on so suddenly, we are going to get her a medical exam to see if there is an organic cause. 9 months ago she was fine.

Thank you for the opinions on the life insurance. Looks like I need to look at the policy to see what it says. We have discovered her net worth might be near $300 k (including a house worth about $160k) so I don't think she'll need Medicaid any time soon. Social services won't help 'cause of a means test. She has money in CD's, IRA, a survivor annuity, the life insurance policies and one other financial instrument that we have yet do figure out what it is. I'm hoping my wife can get more info today.

The "investment" if you can call it that is with a bank. The only evidence we have to show its existence is a statement from Nov that shows a beginning balance and a "required minimum distribution" but there isn't any indication that it is an IRA. I know of nothing else that a bank might issue that would have a RMD other than an IRA. We did not find any 1099s from that bank.

She saved all the 1099s that she received. Her 86 yo sister in law who was an accountant for many years was visiting/helping her so I think she made sure things were properly handled. Until now, the sister in law has been making sure the bills are paid and took the aunt's car keys away.

We did a trial tax calculation to see if she had a tax liability but her AGI was only around $6k. She hasn't filed taxes since her husband died.

That's all we know today, I thought you'd be interested,

Thanks again,
Jim