Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Old 06-26-2021, 05:10 AM   #21
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,264
Quote:
Originally Posted by ncbill View Post
I'd never have a universal life policy again...had a couple of policies I didn't choose (but had to pay) & they both collapsed to guarantee & blew up after ~25 years...IMHO they should be banned.
That is common where the policyholder doesn't pay the minimum required premium, but rare where the policyholder pays the minimum required premium.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 06-26-2021, 06:23 AM   #22
Thinks s/he gets paid by the post
Golden sunsets's Avatar
 
Join Date: Jun 2013
Posts: 2,518
Quote:
Originally Posted by qwerty3656 View Post
I assume the folks who are down on ILIT, would say the same things about long-term care insurance?
Not true for us. My comments on ILIT's above would probably be considered negative, but we also purchased LTC policies at the age of 60 and have kept them. We are now 72/74.
__________________
"Luck favors the prepared mind"
Pasteur
Golden sunsets is offline   Reply With Quote
Old 06-26-2021, 06:38 AM   #23
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 26,821
Quote:
Originally Posted by RetireeRobert View Post
And if the daughter is not "up" to and capable of investing the annual gifts? ...
At first, I was going to respond that "what if the daughter is not "up" to and capable of paying the insurance premium with the annual gifts", but after seeing your link (thanks), and re-reading the OP, it seems that the irrevocable trust would handle this.


Quote:
Originally Posted by RetireeRobert View Post
... You also neglect the fact that the life insurance contractual benefit does provide some significant leverage on the accumulated premiums paid (i.e., the death benefit will in all probability be a significant multiple times the accumulated premiums). ...
Well, this is a very loaded statement. If it was true in general, then many, many posters here would be using life insurance and/or annuities to fund their retirement. It is generally accepted that life insurance is *not* a good investment.


Quote:
Originally Posted by RetireeRobert View Post
... And you gloss over the income taxes paid on investment gains along the way, such taxes could be significant, either along the way or at the end. And the daughter would face some degree of risk and volatility with her own investment results vs a contractually guaranteed life insurance death benefit, which by the way passes income tax free to daughter. That said, there are both advantages and significant disadvantages to an ILIT: a nice brief primer https://www.thebalance.com/guide-to-...trusts-2894256
I mentioned taxes, I'm not sure about "gloss over", it would take more effort than I wanted to put into that post to go into detail, and we'd need to know the tax brackets of those involved, etc. They are not insignificant, and must be considered, I agree.

And remember, the annual gifts pass tax free to the daughter, so from a $ standpoint, it does come down to whether the after tax returns on investments can be expected to exceed the insurance pay-out. And again, if this was a near slam-dunk, I would think many posters here would be "investing" in life insurance policies, regardless of Estate taxes.

And as the link points out, an irrevocable trust can't adapt to changes in tax laws or conditions. It's up to the OP to determine if it fits their needs/wants, but I'd think very, very long and hard before giving up that flexibility.

And as mentioned by others, is the OP really going to be affected by Estate Tax?

-ERD50
ERD50 is online now   Reply With Quote
Old 06-26-2021, 07:49 AM   #24
Thinks s/he gets paid by the post
 
Join Date: Jun 2017
Location: Western NC
Posts: 4,610
Quote:
Originally Posted by RetireeRobert View Post
That is understandable. But next time you would have full choice to be able to pick a good universal policy and would know how to cut through and request realistic projections to refine your choices.
I hope your LTC's underlying policy is plain-vanilla whole life, not universal, as I've mentioned before.

Since with any universal life policy you should expect it to collapse to the guaranteed illustration.

Never rely on the projections the salesman shows you, as they're usually at the highest projected rate of return.

Remember equity-linked life insurance policies normally cap the annual gain you receive (the insurance company keeps the rest) & they usually keep any dividends paid as well.
ncbill is offline   Reply With Quote
Old 06-26-2021, 07:52 AM   #25
Thinks s/he gets paid by the post
 
Join Date: Jun 2017
Location: Western NC
Posts: 4,610
Quote:
Originally Posted by pb4uski View Post
That is common where the policyholder doesn't pay the minimum required premium, but rare where the policyholder pays the minimum required premium.
Which becomes impossible to pay after a couple of decades (unlike plain-vanilla whole life) since the underlying life insurance premium gets repriced every year.

So you might start out paying $X/year (and building cash value) but 20 years later the annual premium could be $5x to keep it in force.

Unfortunately, in the real world growth in cash value never compensates for the premium increases.

The investments have no chance of keeping pace with the increasing premium because of the limitations mentioned in my post above.

An ILIT should be holding whole life or term insurance instead.
ncbill is offline   Reply With Quote
Old 06-26-2021, 09:05 AM   #26
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 10,337
Quote:
Originally Posted by ERD50 View Post
... And as the link points out, an irrevocable trust can't adapt to changes in tax laws or conditions. It's up to the OP to determine if it fits their needs/wants, but I'd think very, very long and hard before giving up that flexibility. ...
Certainly the trustee will be largely hamstrung by the nature of the asset, but strictly speaking the trust document can be written to give the trustee maximum flexibility within fiduciary constraints, including sale or conversion of assets.

Quote:
Originally Posted by ncbill View Post
... An ILIT should be holding whole life or term insurance instead.
Yes. Something that has gotten a bit lost in this discussion is that the OP really has two completely separate decisions; (1) whether to do an ILIT and, if yes, (2) how to fund it.

Buying a Variable Universal Life Insurance Policy (for any reason) is clearly an unpopular idea with the majority of contributors to this thread. The ILIT idea seems to be a little fuzzier because the OP's estate tax vulnerability is unknown. FWIW, barring a radical revision, we will never hit the Federal number but our state begins grabbing money at a far lower point. For the state, we basically play the role of victim.
__________________
Ignoramus et ignorabimus
OldShooter is offline   Reply With Quote
Old 06-26-2021, 09:51 AM   #27
Thinks s/he gets paid by the post
 
Join Date: Oct 2007
Location: Willamette Valley, Oregon
Posts: 1,979
Quote:
Originally Posted by OldShooter View Post
. The ILIT idea seems to be a little fuzzier because the OP's estate tax vulnerability is unknown. FWIW, barring a radical revision, we will never hit the Federal number but our state begins grabbing money at a far lower point. For the state, we basically play the role of victim.
Yes, state can be a worse problem than federal. Oregon, for example, levies estate tax on anything over $1 million. These days, in many cases, simply having a house could put one at the $1 million level all by itself. Everything above that Oregon takes from 10% to 16%.

So, agreed, OP needs to worry if OP's state is one like Oregon, irregardless of if federal taxes are a worry or not.
__________________
Dreams Worth Dreaming are Dreams Worth Planning For. I Spent a Career Planning for Early Retirement.
RetireeRobert is offline   Reply With Quote
Old 06-26-2021, 10:00 AM   #28
Thinks s/he gets paid by the post
 
Join Date: Oct 2007
Location: Willamette Valley, Oregon
Posts: 1,979
Quote:
Originally Posted by ERD50 View Post
A.

Well, this is a very loaded statement. If it was true in general, then many, many posters here would be using life insurance and/or annuities to fund their retirement. It is generally accepted that life insurance is *not* a good investment.
-ERD50


I doubt your claim that many posters here "would be using life insurance to fund their retirement". After all, it's pretty hard to "fund your retirement" since you have to die first to get life insurance to pay anything!!
__________________
Dreams Worth Dreaming are Dreams Worth Planning For. I Spent a Career Planning for Early Retirement.
RetireeRobert is offline   Reply With Quote
Old 06-26-2021, 10:05 AM   #29
Thinks s/he gets paid by the post
 
Join Date: Oct 2007
Location: Willamette Valley, Oregon
Posts: 1,979
Quote:
Originally Posted by ncbill View Post
I hope your LTC's underlying policy is plain-vanilla whole life, not universal, as I've mentioned before.

This thread has nothing to do with LTC.

And what if one's LTC policy has nothing to do with any life insurance at all, but is a plain LTC-only policy??

Thread subject is ILIT.
__________________
Dreams Worth Dreaming are Dreams Worth Planning For. I Spent a Career Planning for Early Retirement.
RetireeRobert is offline   Reply With Quote
Old 06-26-2021, 10:14 AM   #30
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 10,337
Quote:
Originally Posted by RetireeRobert View Post
... Everything above that Oregon takes from 10% to 16%. So, agreed, OP needs to worry if OP's state is one like Oregon, irregardless of if federal taxes are a worry or not.
With numbers like that, though, the proposed Variable Life cure could easily be worse than the estate tax disease.

Quote:
Originally Posted by RetireeRobert View Post
... Thread subject is ILIT.
And about variable life.

@RetireeRobert, do you sell insurance or work for a company that does?
__________________
Ignoramus et ignorabimus
OldShooter is offline   Reply With Quote
Old 06-26-2021, 10:18 AM   #31
Thinks s/he gets paid by the post
 
Join Date: Oct 2007
Location: Willamette Valley, Oregon
Posts: 1,979
Quote:
Originally Posted by OldShooter View Post
.

@RetireeRobert, do you sell insurance or work for a company that does?
Nope and nope. I am a retired CPA. Don't have any relatives in the insurance business either. My closest contact with insurance each year is when I pay my renewal premiums on auto, HO, and umbrella policies!

And you? Do you sell insurance?
__________________
Dreams Worth Dreaming are Dreams Worth Planning For. I Spent a Career Planning for Early Retirement.
RetireeRobert is offline   Reply With Quote
Old 06-26-2021, 10:40 AM   #32
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 10,337
Quote:
Originally Posted by RetireeRobert View Post
.. And you? Do you sell insurance?
Nope. Techie engineer/manager, 50 year stocks and real estate investor, got interested in more details after serving on nonprofit investment committees and agreeing to teach an investment course. The course trigger was a good friend who was sold "four or five annuities" by Fast Eddie. Learned about variable life by attending a "free steak dinner" pitch and finding that the salesman had 21 customer complaints upheld, listed at brokercheck, many in six figures. A really dangerous huckster.
__________________
Ignoramus et ignorabimus
OldShooter is offline   Reply With Quote
Old 06-26-2021, 12:29 PM   #33
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,264
Quote:
Originally Posted by ncbill View Post
Which becomes impossible to pay after a couple of decades (unlike plain-vanilla whole life) since the underlying life insurance premium gets repriced every year.

So you might start out paying $X/year (and building cash value) but 20 years later the annual premium could be $5x to keep it in force.

Unfortunately, in the real world growth in cash value never compensates for the premium increases.

The investments have no chance of keeping pace with the increasing premium because of the limitations mentioned in my post above.

An ILIT should be holding whole life or term insurance instead.
Not sure what you mean by "the underlying life insurance premium gets repriced every year".... the UL policies that I am familiar with didn't reprice anything... mortality charges were set by the contract but could be less depending on experience... minimum required premium never changed since it was set conservatively.

This was at a mutual company in the 1990s. Effectively UL was priced the same as whole-life but had many more component parts because of its structure. We really didn't care whether a customer bought whole-life or UL since the expected economics to us were the same.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 06-26-2021, 12:46 PM   #34
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,264
Quote:
Originally Posted by RetireeRobert View Post
I doubt your claim that many posters here "would be using life insurance to fund their retirement". After all, it's pretty hard to "fund your retirement" since you have to die first to get life insurance to pay anything!!
Sometimes whole life was pitched as retirement funding... you have life insurance coverge when your family is growing up when you need it and then when you retire and presumably no longer have need for life insurance you elect to receive the cash value over the rest of your life like a SPIA.

It's probably not the greatest way to fund retirement but it's also probably not the worst. The IRR on a whole life policy that I bought when I was a naive 22-year old through when I was 65 was 4.84% (today's CSV compared to premiums paid since 1977 ignoring the value of life insurance coverage).

Meanwhile, Vanguard Total Bond returned 5.76% from Jan 1987 to May 2021 (as far back as i could go in Portfolio Visualizer), so I would hae done a lot worse.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 06-26-2021, 02:24 PM   #35
Thinks s/he gets paid by the post
 
Join Date: Oct 2007
Location: Willamette Valley, Oregon
Posts: 1,979
Quote:
Originally Posted by pb4uski View Post
Sometimes whole life was pitched as retirement funding... you have life insurance coverge when your family is growing up when you need it and then when you retire and presumably no longer have need for life insurance you elect to receive the cash value over the rest of your life like a SPIA.
OP was talking about universal life though.

And my comments about "leverage" (which OP also did mention in first post) were that the life policy contractually obligated benefit payout to beneficiary was some multiple of accumulated premiums. To many folks, including perhaps the OP, the guarantee of some multiple of their premium being contractually defined, and then available to their daughter or other beneficiary, is what attracts them. They want to know she is provided for!!

The often knee-jerk reaction is "well, one could invest it for the 30 years, or whatever long time period, and come out way ahead" (cue link to fancy projection of returns over "x" years). But these "invest it yourself" results are "not" contractually obligated or guaranteed. What if, at the crucial point she needs the dough, the market happens to be in a long downturn? Then what? The fancy projections of "average annual returns" don't save her anguish then!

And this route also ignores that some people, perhaps including OP's daughter or the OP themselves, may not have the knowledge/skill/ability to invest wisely. Or she, or they, may not have the will and endurance to invest wisely and over that long term. They prefer to know "daughter will be taken care of". OP was also interested in tax efficiency as well, both income and estate tax. OP's search into ILIT's and use of life insurance inside it is not so far fetched.
__________________
Dreams Worth Dreaming are Dreams Worth Planning For. I Spent a Career Planning for Early Retirement.
RetireeRobert is offline   Reply With Quote
Old 06-26-2021, 02:33 PM   #36
Thinks s/he gets paid by the post
 
Join Date: Oct 2007
Location: Willamette Valley, Oregon
Posts: 1,979
Quote:
Originally Posted by ncbill View Post
Which becomes impossible to pay after a couple of decades (unlike plain-vanilla whole life) since the underlying life insurance premium gets repriced every year.

So you might start out paying $X/year (and building cash value) but 20 years later the annual premium could be $5x to keep it in force.
??

OP stated in original post the specific policy they are looking at has "level" premiums.
__________________
Dreams Worth Dreaming are Dreams Worth Planning For. I Spent a Career Planning for Early Retirement.
RetireeRobert is offline   Reply With Quote
Old 06-26-2021, 03:24 PM   #37
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,264
Quote:
Originally Posted by RetireeRobert View Post
OP was talking about universal life though.

And my comments about "leverage" (which OP also did mention in first post) were that the life policy contractually obligated benefit payout to beneficiary was some multiple of accumulated premiums. To many folks, including perhaps the OP, the guarantee of some multiple of their premium being contractually defined, and then available to their daughter or other beneficiary, is what attracts them. They want to know she is provided for!!

The often knee-jerk reaction is "well, one could invest it for the 30 years, or whatever long time period, and come out way ahead" (cue link to fancy projection of returns over "x" years). But these "invest it yourself" results are "not" contractually obligated or guaranteed. What if, at the crucial point she needs the dough, the market happens to be in a long downturn? Then what? The fancy projections of "average annual returns" don't save her anguish then!

And this route also ignores that some people, perhaps including OP's daughter or the OP themselves, may not have the knowledge/skill/ability to invest wisely. Or she, or they, may not have the will and endurance to invest wisely and over that long term. They prefer to know "daughter will be taken care of". OP was also interested in tax efficiency as well, both income and estate tax. OP's search into ILIT's and use of life insurance inside it is not so far fetched.
I was only responding to the part of your response that life insurance isn't retirement funding since you have to die to get the death benefit and point out that life insurance is sometimes used for retirement funding... less so today but more so back in the 1970s and 1980s.

And what I described could be done with whole life or UL.

I wasn't commenting at all on the use of life insurance with an ILIT.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 06-26-2021, 03:41 PM   #38
Thinks s/he gets paid by the post
 
Join Date: Oct 2007
Location: Willamette Valley, Oregon
Posts: 1,979
Quote:
Originally Posted by pb4uski View Post
I was only responding to the part of your response that life insurance isn't retirement funding since you have to die to get the death benefit and point out that life insurance is sometimes used for retirement funding... less so today but more so back in the 1970s and 1980s.

And what I described could be done with whole life or UL.

I wasn't commenting at all on the use of life insurance with an ILIT.

Understood. Actually, I quoted you only for the little first part of my response. Sorry, I should have put the rest of my response in a separate post.

The big part, the rest of my response, I was on a rant about some other previous posts (and previous threads) which always seem to ding life insurance (or annuities) and advocate "invest it your self, make more, save all the insurance product fees." Such responses neglect the very fact many people want, perhaps need, and are willing to pay, for the "guarantee" aspect of insurance. Such as "guaranteeing" a loved one (like OP's daughter in this thread) is financially taken care of in some desired degree. Rant over.
__________________
Dreams Worth Dreaming are Dreams Worth Planning For. I Spent a Career Planning for Early Retirement.
RetireeRobert is offline   Reply With Quote
Old 06-26-2021, 05:36 PM   #39
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,264
Quote:
Originally Posted by RetireeRobert View Post
??

OP stated in original post the specific policy they are looking at has "level" premiums.
I'd venture to guess, at least at my former employer, if someone paid the whole life premium into a UL contract with the same sum insured that the CSVs would be similar after 30 years.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 06-26-2021, 07:11 PM   #40
Full time employment: Posting here.
 
Join Date: Nov 2015
Posts: 685
if you're going to use variable universal life, you should get a policy from ameritasdirect.com and use Vanguard funds.
teej1985 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Variable Universal Life Insurance Question DrGerm Young Dreamers 6 10-20-2018 10:48 AM
Why Cancelling An Existing Whole Life Or Universal Life Policy May Be A Bad Idea mickeyd FIRE and Money 8 04-21-2013 11:26 AM
Questions about overfunding a universal life insurance policy Nords FIRE and Money 7 01-16-2012 03:20 PM
Universal Life for Long Term Care Insurance? DJRR FIRE and Money 2 02-28-2008 11:22 AM
Universal Life Insurance nellieb FIRE and Money 13 06-24-2007 04:19 PM

» Quick Links

 
All times are GMT -6. The time now is 06:01 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.