Permanent life insurance for an 80 year old widow with three children
Does anyone have experience looking into permanent life insurance for 80 year old woman good health. Considering for planning purposes helping my mom covert an ira or potentially procure insurance instead. She is 80. Widower. Good health. Three children. Has sufficient funds. Would be curious for any insights on costs versus return for say a 1m or 2m policy.
Thanks for the help.
Scott
Permalink Submitted by Alan - IRA critic on Fri, 2021-04-02 21:08
Most responders here do not deal with life insurance. But I think that if she qualified for a policy you are thinking of cashing in her IRA to pay the premium. How much she distributes in a single year will determine the marginal tax rate for the IRA distribution, although her RMD would be taxable in any event. If she can spread the IRA distributions out over 2 or 3 years, the tax cost would be less. And if the premium is surcharged, she gets less life insurance per dollar of premium and per dollar of taxable IRA distributions. A third strategy to compare might be Roth conversions, and I am sure there are scenarios that use all 3 options in optimal amounts, maybe more if LTC is factored in. Perhaps you can find a specialist to present a plan for her that has no commission interest in selling life insurance.
Permalink Submitted by Bruce Steiner on Fri, 2021-04-02 22:30
Is someone dependent on her for support who would be adversely affected if she were to die early?
Permalink Submitted by Tunc Tanin on Fri, 2021-04-09 04:42
I sell life insurance for a living. Usually in cases like this, for a 80 year old, in the initial years the death benefit for the beneficiaries is higher if you choose a permanent life insurance. Life insurance death benefit is also tax free at death usually, it is outside the probate and her children will have access to cash pretty quickly. Just understand in the first 2 years after getting a life policy, insurance company will deeply investigate the claim and check wont be issued right away. Now if the beneficiaries are low income, life insurance will work much better especially if you use trusts because the children would have to pay taxes on the IRA and possibly loose social benefits. Now if the children are middle income and stable income, if she lives it wont make a huge difference in most cases. The LTC piece is also important. If you get a permanent life insurance and structure it in a way that does build minimum cash value, you can protect more assets from state long term care grab. As an IRA, they can take the whole thing in a LTC situation. WHile fee only advisors are nice sometimes, a plan that incorporates complex LTC strategy needs to be watched over every year. Work with a commissioned person who has been doing this for at least 5 years.