Ratings Updates

Entries for February 2010

There are no updates for ratings of the top life companies this month.  However, I would like to share a discussion I had a few weeks ago with an advisor for a client considering donating a policy to charity that you might find of interest. 

 

The client has a policy with a significant gain in the contract and no longer wants the coverage.  He has paid $50,000 into the policy but has $85,000 in cash value (not the real numbers - just for illustration).  His accounting counsel has told him that if he gives the policy to the charity he can deduct the $50,000 not the $85,000.  (For our purposes here we are assuming the "fair market value" of the contract is the cash value rather than dealing with interpolated terminal reserves, etc.)

 

We mentioned that if the extra $35,000 not being deductible created a concern there might be another way to "skin the cat."  We suggested he withdraw the $50,000 and donate it directly to the charity in cash (or to help fund a separate life insurance policy).  He could then place the policy on "paid-up" status for whatever is available for the $35,000 residual value.  That death benefit will then accrue to the estate at death,  potentially freeing other assets in the overall estate plan.

 

If the gift of a life insurance benefit is important, either a new policy or another policy without a gain in the contract could be used to accomplish the gift with a full deduction for the values transferred.  The $50,000 could be used to increase the death benefit or support premium payments for the policy donated, if needed.

 

This situation is not particularly complicated but the approach was not obvious to the advisor.  Objective, knowledgeable advice is what we offer.  Each client has unique objectives and concerns.  Please call us at 414.9955 if you are working through challenging life insurance issues for your clients - we would be glad to help.