Life Insurance

Water Cooler
#41

^ along that theme, anyone here choose to self-insure? I might be naive and I’m sure my views will change once I have kids, but I despise all forms of insurance and try to avoid it when possible.

#42

Not true. The more insurance you need. Estate tax bro. Start thinking like a rich person.

#43

I’m calling BS on this one.

#44

But you don’t pay any estate tax until you get to $11m.

And your insurance death benefit is included in your estate. So if you have $5m in insurance, you can expect your tax bill to increase by $2m.

#45

BS on what fat boy. Not everybody weighs 300 lbs and has a resting pulse rate over 100

#46

^Group rates with SGLI (Servicemember’s Group Life Insurance) in the military is $29 per month, and that’s for $400k of coverage. And military people are probably about the healthiest group of people you’ll find. (You know, weight limits, physical fitness, mandatory annual checkups, things like that.)

But I’ll bite. Since I’m a life insurance agent, tell me the carrier and the state, and I’ll look up the policy. I’ll assume that you, like the rest of us, are over six feet tall, weigh 180, bench 600, and run 30+ miles a day at a 5 minute pace.

#47

https://www.analystforum.com/comment/91775031#comment-91775031

#48

I just have about $20m in my private placement policy :wink:

@Greenman, death benefit is only included in estate if you name your estate as beneficiary, right? If you name an individual I believe it is not taxable?

#49

Only if the estate is the beneficiary, no?

#50

Not true. Life insurance proceeds are included in your gross estate if 1.) the proceeds are payable to your estate, either directly or indirectly; or 2.) if you posessed any incidents of ownership in the policy at the time of your death. And the IRS has a three-year lookback period. So if you transfer the policy to another person (or entity) within three years of your death, it will still be included in your gross estate. (So you can’t transfer your policy to your kids while you’re on your deathbed.)

See IRS Code Section 2402 for more details. Or read the investopedia article on it.

http://www.investopedia.com/articles/pf/06/transferlifeinsurance.asp?lgl=myfinance-layout

#51

Thanks for the clarification Greenie. I didn’t realise our estate laws differed so much.

In Canada the life insurance proceeds to individuals are tax free, and our estate thresholds are lower than 11m. So by our laws many wealthy individuals purchase insurance to offset their estate bills.

#52

All about that cash surrender value

#53

Remember–I’m talking about the ESTATE TAX. The DEATH TAX. The tax that is levied on the NET ESTATE when you die.

Life insurance proceeds are always income-tax free to the beneficiary.

#54

Shouldn’t this mean that life insurance rates for very old and sick people will be close to the marginal tax rate for the policy amount if in an estate?

#55

^For high-income people, yes.

But that’s kind of a bad question. It’s not “either-or”. It’s “both-and”.

If life insurance proceeds were income-tax-taxable and paid to the estate, then you’d have to pay tax twice–once as income tax, and again as estate tax. Or, under current tax law, your beneficiaries would pay income tax and your estate would pay estate tax.

#56

Very interesting that a life insurance policy is part of the estate given that the estate loses its claim to any benefits when you die.

#57

#AnotherWinForCFP?

#58

#FoodForThought

#59

True dat!!!