Our sweet elderly neighbor & friend wants to leave a legacy (my definition) inheritance to her infant GGGson. Her trusted FA is recommending a prepaid ($10k) IUL policy from Minn Insurance Co. She did show me the policy & asked what I thought. I've no knowledge in this area, but did opinion this is likely an expensive vehicle. That's not really a concern for her, and this does maybe meet her goal. Any alternatives that might accomplish the same goal?
Legacy investment for GGGrandson?
- Thread starter Kiddog78
- Start date
VanWinkle
Thinks s/he gets paid by the post
How about an UTMA account(controlled by Grandma) at Fidelity/Vanguard/Schwab that can be invested in a low cost total stock market fund that will really give the Grandson a legacy without all of the expenses. IUL is not a great investment except for the very wealthy to shield assets.
VW
VW
Luvtoride
Thinks s/he gets paid by the post
I think it’s a great idea for a grandchild. As long as it has cash value for borrowing against in college or later years.
I’ve used prepaid cash value life insurance policies for my daughters and their families. While my wife and I are alive we own the policies and could use the cash value to borrow against if we ever needed it (unlikely). Otherwise these are significant face value permanent policies that will protect their families while giving them (or us) a vehicle To borrow against for paying for college.
I’ve used prepaid cash value life insurance policies for my daughters and their families. While my wife and I are alive we own the policies and could use the cash value to borrow against if we ever needed it (unlikely). Otherwise these are significant face value permanent policies that will protect their families while giving them (or us) a vehicle To borrow against for paying for college.
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
This! Cash value life insurance is very rarely a good idea unless you are selling it.
The "trusted FA" is trying to earn a buck.
Kings over Queens
Recycles dryer sheets
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who is the life insurance policy on, or for? who is the "insured"
I ask, because if it's gggrandma, ten grand buys whatever amount of life insurance that gets paid to a trust for the gggrandkid, well, that's not so bad.
It were talking about a 10k policy on the kid, no bueno, in my opinion.
I'd rather the money in a 529 or UGTM (each has pro/con) funded with an s&p index fund.
I ask, because if it's gggrandma, ten grand buys whatever amount of life insurance that gets paid to a trust for the gggrandkid, well, that's not so bad.
It were talking about a 10k policy on the kid, no bueno, in my opinion.
I'd rather the money in a 529 or UGTM (each has pro/con) funded with an s&p index fund.
target2019
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Trusted FA earns X from the policy, is my first guess.
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Oh, and ... this is not an FA that should be trusted and his relationship with the neighbor is not a fiduciary relationship.
pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Having worked in life insurance and owned a whole life policy since my early 20s, I think that is a horrible idea. Whole life insurance is good for some insurance situations but less so as an investment.
There are limited situations where whole life insurance is a good solution (like to cover estate taxes on a family business or family farm or for business partners) but college savings is not one of those applications.
I have a portion of an inherited Roth IRA earmarked for my gransdon. While I have it aggressively invested one could easily just put the money in SPY or a total stock ETF or a world stock ETF.
If she has tax deferred saving she could do a $10k Roth conversion to a new Roth with the GGGson as the beneficiary and then invest in in one of the suggestions above and watch if grow. It will more than likely outperform the whole life policy and still be tax free.
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Agree the 'trusted FA' is trying to earn some commissions.
And I say that as someone who has both worked for an independent CFP and is a client of another independent CFP firm!
The CFP I worked for was semi-retired and although a licensed insurance agent, VERY SELDOM ever recommended insurance (of any type - annuity, life, LTC, et. al.) to his clients except in very specific situations.
I learned from him that on certain types of products, the agent could adjust his commission rate upwards (which was the detriment of the client) or, if he was truly ethical in his fiduciary duties, adjust his rate downwards to the minimum to the benefit of the client.
I'm pretty sure the majority of us would vote that the OP's friend's FA is most probably doing the former, and not the latter!
And I say that as someone who has both worked for an independent CFP and is a client of another independent CFP firm!
The CFP I worked for was semi-retired and although a licensed insurance agent, VERY SELDOM ever recommended insurance (of any type - annuity, life, LTC, et. al.) to his clients except in very specific situations.
I learned from him that on certain types of products, the agent could adjust his commission rate upwards (which was the detriment of the client) or, if he was truly ethical in his fiduciary duties, adjust his rate downwards to the minimum to the benefit of the client.
I'm pretty sure the majority of us would vote that the OP's friend's FA is most probably doing the former, and not the latter!
Al18
Thinks s/he gets paid by the post
Maybe a bit old school, but put $5000 in a EE Savings bond from TreasuryDirect. Currently paying 2.7% interest, but guaranteed to double in value in 20 years. No taxes due on the interest until redeemed, and if used for educational purposes, no taxes due.
HI Bill
Thinks s/he gets paid by the post
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100% into VTI or VOO. Let it ride for 18 years!
Why not buy an I-bond which keeps with inflation and still defers interest? But it can't be used for their schooling. Or better, a MYGA that keeps rolling over?
My mom bought my son a $500 bond when he was a toddler. It wasn’t worth that much more when he cashed it in as a young adult.
Should have bought him stock, total US or S&P500 fund.
I don’t get the logic of buying fixed income investments for kids.
Should have bought him stock, total US or S&P500 fund.
I don’t get the logic of buying fixed income investments for kids.
brett
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We have established post secondary edu funds for our grandchildren. We deposit 2500 each per year since birth. Not fixed. All in equity accounts because of their young age.
Should we pass away in the near future we have a provision in our wills that a certain amount of money will come off the top of the estate to put in trust for their edu.
Looked at all sorts of plans. Seems to me straight long term investment will yield the most benefit. As each grandchild (there are currently 4) approaches post secondary age we will change to the allocation based on the market at that time.
The difference might be that we are actively managing these funds and they will remain under our control until we pass.
Should we pass away in the near future we have a provision in our wills that a certain amount of money will come off the top of the estate to put in trust for their edu.
Looked at all sorts of plans. Seems to me straight long term investment will yield the most benefit. As each grandchild (there are currently 4) approaches post secondary age we will change to the allocation based on the market at that time.
The difference might be that we are actively managing these funds and they will remain under our control until we pass.
