I have an existing mortgage on my home. Can I name the bank as beneficiary to my life insurance policy?
Total Comments: 28
Posted: Fri Feb 08, 2013 09:12 pm Post Subject:
It is irrelevant if the example is wild or not. The whole point is that regardless of the beneficiary, the death benefit is part of the estate of the insurance if the insured owns the policy.
Posted: Sat Feb 09, 2013 06:14 pm Post Subject:
It is irrelevant if the example is wild or not.
:roll:
Posted: Sat Feb 09, 2013 11:35 pm Post Subject:
....as long as you understand that every time that we have a disagreement, you understand that I am correct.
Posted: Sun Feb 10, 2013 05:29 am Post Subject:
LMAO. A legend in your own mind.
Posted: Mon Feb 11, 2013 01:58 am Post Subject:
Max, there is so much that I don't know. The difference between me and you is that I have no problem admitting when I don't know something and I don't tell you that you are wrong when you are correct.
Posted: Fri Apr 05, 2013 11:30 pm Post Subject:
Hellllooooooooo! I'm back, once again.
Max, thanks for defending me and I am ABSOLUTELY able to defend myself, as you properly recognized.
My ONLY POINT in stating that I don't recommend naming your estate as a beneficiary is this: It CAN have an adverse effect on the estate value, regardless of who owns the policy at the time of the insured's death. Here's my point-
Let's say we have third party ownership of the policy. The insured's brother owns the policy that covers our insured (used the brother instead of the spouse so that we can quit that "unlimited marital deduction" argument). The brother names the insured's estate as beneficiary for whatever reason... just for the sake of argument.
Now, due to the third-party ownership of the contract, there would be no "incident of ownership" in the contract that would make the death benefit part of the insured's estate through ownership. But remember- we've named the insured's estate as beneficiary.
Now, if the insured dies and we pay the estate the death benefit, the estate is grossed-up by the death benefit amount.. If the gross estate value is equal to or less than $5.25 million- no taxes. But let's say that the gross estate value, before we include the life insurance dollars, is $4,000,000. No taxes. Let's say that the death benefit from the policy is $2.5 million. Now we have a gross estate value of $6.25 million, $1,000,000 of which is now taxable.
Got an extra $400,000 laying around?
That's the only point I was trying to make. That's it. Finis. End. Finuto.
InsTeacher 8)
Posted: Sat Apr 06, 2013 11:56 am Post Subject:
You are certainly correct, but that isn't an example of naming one's estate as beneficiary. That is an example of naming someone else's estate as beneficiary.
Not only is this stupid as you are pointing out (not only Fed estate tax possibility, but also state estate taxes and probate), but it is EXTRA stupid.
The living brother, in your example, has made a $2.5 million dollar gift to the estate of his deceased brother.
Posted: Mon Apr 08, 2013 01:28 am Post Subject:
The living brother, in your example, has made a $2.5 million dollar gift to the estate.
No, it's not a gift, it's the death benefit. No one pays income tax or gift tax on that. But the estate value has instantly increased by the amount of the proceeds, just as if it were owned by the now deceased insured. That's the point InsTeacher was making. He wasn't recommending it as a solution.
I certainly agree that the scenario is not likely to happen, but stranger things than this actually have.
Posted: Mon Apr 08, 2013 11:48 am Post Subject:
Best option is to choose anyone you trust as beneficiary and add point in your will that your beneficiary will pay mortgage first after receiving the claim amount.
Posted: Mon Apr 08, 2013 11:56 am Post Subject:
Best option is to choose anyone you trust as beneficiary and add point in your will that your beneficiary will pay mortgage first after receiving the claim amount.
There is nothing worse than giving advice without knowledge. This is terrible advice and should not be followed. If you want to know why, ask, and I'll expand on this.
Posted: Fri Feb 08, 2013 09:12 pm Post Subject:
It is irrelevant if the example is wild or not. The whole point is that regardless of the beneficiary, the death benefit is part of the estate of the insurance if the insured owns the policy.
Posted: Sat Feb 09, 2013 06:14 pm Post Subject:
It is irrelevant if the example is wild or not.
:roll:
Posted: Sat Feb 09, 2013 11:35 pm Post Subject:
....as long as you understand that every time that we have a disagreement, you understand that I am correct.
Posted: Sun Feb 10, 2013 05:29 am Post Subject:
LMAO. A legend in your own mind.
Posted: Mon Feb 11, 2013 01:58 am Post Subject:
Max, there is so much that I don't know. The difference between me and you is that I have no problem admitting when I don't know something and I don't tell you that you are wrong when you are correct.
Posted: Fri Apr 05, 2013 11:30 pm Post Subject:
Hellllooooooooo! I'm back, once again.
Max, thanks for defending me and I am ABSOLUTELY able to defend myself, as you properly recognized.
My ONLY POINT in stating that I don't recommend naming your estate as a beneficiary is this: It CAN have an adverse effect on the estate value, regardless of who owns the policy at the time of the insured's death. Here's my point-
Let's say we have third party ownership of the policy. The insured's brother owns the policy that covers our insured (used the brother instead of the spouse so that we can quit that "unlimited marital deduction" argument). The brother names the insured's estate as beneficiary for whatever reason... just for the sake of argument.
Now, due to the third-party ownership of the contract, there would be no "incident of ownership" in the contract that would make the death benefit part of the insured's estate through ownership. But remember- we've named the insured's estate as beneficiary.
Now, if the insured dies and we pay the estate the death benefit, the estate is grossed-up by the death benefit amount.. If the gross estate value is equal to or less than $5.25 million- no taxes. But let's say that the gross estate value, before we include the life insurance dollars, is $4,000,000. No taxes. Let's say that the death benefit from the policy is $2.5 million. Now we have a gross estate value of $6.25 million, $1,000,000 of which is now taxable.
Got an extra $400,000 laying around?
That's the only point I was trying to make. That's it. Finis. End. Finuto.
InsTeacher 8)
Posted: Sat Apr 06, 2013 11:56 am Post Subject:
You are certainly correct, but that isn't an example of naming one's estate as beneficiary. That is an example of naming someone else's estate as beneficiary.
Not only is this stupid as you are pointing out (not only Fed estate tax possibility, but also state estate taxes and probate), but it is EXTRA stupid.
The living brother, in your example, has made a $2.5 million dollar gift to the estate of his deceased brother.
Posted: Mon Apr 08, 2013 01:28 am Post Subject:
The living brother, in your example, has made a $2.5 million dollar gift to the estate.
No, it's not a gift, it's the death benefit. No one pays income tax or gift tax on that. But the estate value has instantly increased by the amount of the proceeds, just as if it were owned by the now deceased insured. That's the point InsTeacher was making. He wasn't recommending it as a solution.
I certainly agree that the scenario is not likely to happen, but stranger things than this actually have.
Posted: Mon Apr 08, 2013 11:48 am Post Subject:
Best option is to choose anyone you trust as beneficiary and add point in your will that your beneficiary will pay mortgage first after receiving the claim amount.
Posted: Mon Apr 08, 2013 11:56 am Post Subject:
Best option is to choose anyone you trust as beneficiary and add point in your will that your beneficiary will pay mortgage first after receiving the claim amount.
There is nothing worse than giving advice without knowledge. This is terrible advice and should not be followed. If you want to know why, ask, and I'll expand on this.
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