by Guest » Tue Mar 01, 2011 10:46 pm
My aunt had a life insurance on her son, she was the named beneficiary and has predeceased the insured. One of the daughters continued to pay the policy, and then the insured passed away. How can this daughter get the insuarance company to pay her the benefits so she can pay the funeral expenses.
Posted: Fri Mar 04, 2011 12:22 pm Post Subject:
Max, please show documentation from a policy that says that if the owner dies, the insured becomes the new owner. I am not saying that you are wrong. There may be a policy or policies that say that. The reason why I am doubting you is because it would be awfully stupid for someone to ever use this type of policy if they are not going to be the owner/insured.
Ex. Jim and Bob are business partners. They each buy a $5,000,000 policy on each other to fund their buy/sell agreement. Ultimately, they sell their business. They each hold onto the insurance policies. Jim dies. The policy that he owns on Bob now has a $4,000,000 cash surrender value and a $13,000,000 death benefit.
What happens if the ownership of the policy that Jim owns on Bob automatically becomes Bob’s?
When Jim died, he had incidence of ownership on the policy. The value of the policy that he had on Bob was at least $4,000,000. That will be part of his taxable estate, but Bob will be getting the policy. If Jim’s estate was already large, not only won’t his family get $4,000,000 if they cashed it out or $13,000,000 + when Jim died, the family by this automatic change in ownership will get nothing and possibly owe $2,000,000 in estate taxes.
Thus, I am doubting that any company would do it this way, but I could be wrong, so I’m asking for documentation.
Posted: Fri Mar 04, 2011 07:46 pm Post Subject:
I have an example from a Farmers term policy, but I cannot get any file format to attach (not pdf, doc, jpg, html) as proof.
The contract states: "Successor Owner . . . The successor owner becomes owner at the death of the owner. If the owner and successor owner die before the insured, the insured will become the owner."
I have a Primerica term policy which has similar language but omits any mention of successor owner.
I have a GE UL policy that discusses a "contingent owner" and states "If the Contingent Owner is not alive on in existence at the Owner's death, all ownership rights vest in the Onwer's estate or successors."
And then I have a Prudential VUL policy that doesn't say anything about the matter at all.
So I stand by my statement that to know for sure, we have to see the actual contract.
As for your post from an Americo marketing piece, please post contract language. That's what has to go to court. So do what you asked me to do, post contract language. I jump through all your hoops.
ILITs are no more expensive than any other trust to create or maintain. It's just a document. But it confers benefits that no revocable trust does. And it certainly escapes the lookback period for taxation AND Medicaid that no revocable trust does. The original owner can be the trustee, retaining the right to name beneficiaries, but the trust document will exclude the right of the trustee to borrow from the policy cash value for the benefit of any person OTHER than a named beneficiary of the trust, as would be found in any trust.
How you can argue that the cost of creating a trust ($1500-$2500) is more than the cost of a policy is absurd. Maybe more than the first year premium, but not the total cost of a policy over any number of years.
Posted: Fri Mar 04, 2011 09:56 pm Post Subject:
Thanks, Max. I have no reason not to believe you. I don't know if it is coincidental or not that both of those contracts that say that it goes to the insured are term insurance. It's not as big of an issue with term insurance.
Do you understand why I think that it makes no logical sense for ownership to revert to the insured. Again, this is because since it belonged to the owner at the time of his death, the value of the policy is part of his taxable estate.
ILITS are more expensive than other trusts simply because they need to be maintained. Here is my absurd argument going back to the example of the 30 year old with $250,000 of 20 year term. If he's healthy, he can buy a policy for $155.
You want him to pay $1500 + annual crummey letter costs on top of this. Let's assume that the annual cost is $100. Instead of doing this, he can just buy $500,000 of coverage for $250.
I work with a ton of estate planning attorneys and none of them would recommend an ILIT if there isn't an expectation of possible tax ramifications. For the husband wife situation, two things need to happen for estate taxes to become an issue. There must be an estate of $5,000,000 and the spouse needs to be dead. That isn't a concern of the 30 year old and by the time that it becomes a concern, the $250,000 policy is peanuts. If it becomes a concern, use an ILIT. Until then, it is pure overkill.
Posted: Tue Apr 19, 2011 05:55 pm Post Subject:
my boyfriends dad passes. we think he changed his life ins policy to his new wife instead of his children who were on it sinnce thier mom passes years ago. can the children challenge it and they dont even know the namr of th ins company help
Posted: Mon Sep 05, 2011 12:24 am Post Subject: beneficiary but never collected
I was named primary beneficiary and my son secondary on a life insurance policy of a guy that claimed my son as his own even though he was not his biological son. We did not live together at the time of his death. He changed his policy about 2 wks before he was killed to be left to us. That has been over 13 yrs ago and I have heard nothing regarding the funds. Could his parents have received the money without me signing any papers? Prior to him making the changes, his mother and father were the beneficiaries. Could the policy still be sitting somewhere until my son turns 18?
Thanks
Posted: Mon Sep 05, 2011 01:11 am Post Subject:
That has been over 13 yrs ago and I have heard nothing regarding the funds
And you've simply been sitting around all this time waiting for the money to drop out of the sky?
Could his parents have received the money without me signing any papers?
Yes, if they were actually the beneficiaries.
Could the policy still be sitting somewhere until my son turns 18?
Unlikely. But you can always call the insurance company and ask.
Posted: Sun Feb 02, 2014 12:15 am Post Subject: beneficiary rights
My niece claims to have been paying on a life policy on her mother but she cashed in the policy & used the money on herself & 2 yrs later worked it to were she had her mother put in a home...is this a legal thing for her to do when my sister is still alive?
Posted: Thu Feb 06, 2014 02:32 pm Post Subject:
If your niece was the owner of the life insurance policy on her mother, then she is entitled to do anything with the policy that she wants -- she can terminate the policy for its cash value, borrow against the cash value, sell the policy to someone else. It would all be entirely legal -- if she is the policyowner.
If she is not the policyowner, then insurance fraud may have been committed if your niece misrepresented herself as the policyowner.
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