Elizabeth Richardson wrote:

[...]
- quote -

You missed the point, it isn't about life insurance per se. And the
only event I estimated the probability of was that of him outliving his
parents, not the probability of his death.

It's about insuring the far-reaching future of young children who have
neither the knowledge nor the legal ability to control their financial
situation, versus insuring the limited future of senior citizens who do
have control over how and where they live, and about whose overall
financial and family situation we know almost nothing.

I see a big difference between the two.

-Mark Bole

- quote -


The TERM Contract that he has referred to DOES have a LEVEL PREMIUM
for the length the contract. He has stated that he is financialy secure in
that
IF his parents live beyod twenty years, that he will have made other
arrangements.


- quote -

HOWEVER the C/V contract that you refer to WOULD be includable in the
ESTATE of his WIFE in the event of her death prior to his....


Cal Lester CLU

- quote -

With the wife as the "OWNER" of the contract, the "VALUE" of the contract
would be includable in HER Estate for Estate Tax Purposes. HOWEVER since
you are contemplating a TERM Contract, the value of the contract, is nil,
since there is no cash value.

Cal Lester CLU

On Thu, 31 Aug 2006 13:32:42 -0500, deja_bhoot2000[at]yahoo.com wrote:

- quote -

I always get nervous when we make important decisions based upon
someone dying by X date. So if this were me I would consider hedging
my bet with a cash value policy that keeps premiums level.

As for the taxes, you already know that the death benefit is income
tax free. As for estate taxes, anything left to a non-spouse,
non-charitable beneficiary under $2 million escapes the federal estate
tax.

Where your case departs from the norm is that foreign nationals are
named beneficiary. As for their country taxing dollars coming in from
USA I have no clue. Also, since these folks are not US Citizens you
may have a problem with US estate taxes.

So you have complications all over. While you search for answers (by
that I mean pay lawyers <grin> ) think about this simple solution: Buy
a Universal Life policy on you. Pay enough so that based on minimum
guaranteed rates the policy will last 25 years. Name your wife owner
and beneficiary (avoids income and estate taxes). Tell her that when
you die to use the money for your parents. Further, in case your wife
does not survive you, name your best friend the contingent beneficiary
(avoids income tax and, if your estate is under $2 million, estate
taxes also) and tell him/her what you want him/her to do.

And before you come up with objections to this, I recognize this is
imperfect and not risk free. Nothing is perfect and risk free. You
do the best you can, try to keep things simple, and move on.


-HW "Skip" Weldon
Columbia, SC

Elizabeth Richardson wrote:
- quote -

Elizabeth,

Insurance proceeds are non taxable for income taxes to the beneficiary.
But insurance proceeds are INCLUDIBLE in the estate of the deceased
(that would be me, if I were to die while policy was in effect), for
estate tax purposes, if the policy was owned by deceased. That's why I
am opting for: insured = me; owner =wife; beneficiary = parents.

- quote -

All insurance beneficiary designation forms that I have seen have a box
for the SSN of the beneficiary.

- quote -

I have an insurance broker for auto/home/umbrella. However, for life
insurance, none of the brokers I have contacted have been able to give
any reasonably competitive quotes. For this reason, I do not have a
life insurance agent. For example, a couple of years ago when I bought
my 20-year term policy (to help my wife+children, in case I were to
die), for a PERFECTLY healthy person, for $500K, 20-year term policy, I
got online quote from GE insurance (and purchased their policy) for
$310/year. Through brokers, I had gotten rates as 450, 500 and 700.
That is, 50% to 125% MORE.

The idea of the post was to get a CASUAL second opinion that
"insured=me; owner=wife; beneficiary=parents" is an apporpriate way to
go.
- quote -

Elizabeth Richardson wrote:
- quote -

In the above paragraph, Elizabeth has outlined my case better that
perhaps I did in my original case. Basically, it is prudent for me to
have life insurance on my life to help my wife and children in case I
were to pass during the next 20 years. After that, there would be
enough critical capital to take care of them.

Likewise, during the next 10 years or so, my parents remain dependent
upon me. After that, they would be either dead, or, I would have set up
enough aside for them, without a need for it to come from my current
income (i.e., they would be, financially, OK, even if I were dead after
10 years).

Since this thread has taken a drift, I am curious about some
quantitative checks (TANGETIAL stuff!). For those who have access to
mortality tables, and numerically inclined, I would like to know the
following:

x = probability of a male alive at age 40, dying sometime between 40 &
60
y = probability of a male alive at age 40, dyring between ages 40 and
50
z = probability of a male age 63 and female age 63, and at least 1
SURVIVING past 73

In case of my 20-year term policy, I am insuring against x (I am dead;
wife/children needs money)

In case of the 10-year term policy, I am insuring against (y*z) (I am
dead; at least 1 parent alive, and they need money)

Mark Bole wrote:
- quote -

Mark,

I know that insurance proceeds will not be taxable to my parents, from
an income tax perspectives. I also want to make sure that the insurance
proceeds would NOT be includible in my estate for estate tax purposes
(it is includible, if the deceased is also the owner of the policy).

That's why, I want insured =me; OWNER = wife; designated beneficiary =
parents. I think this accomplishes both income tax free, estate tax
free, but I just wanted a casual second opinion that I am not missing
something.


- quote -

I agree, odds are pretty small. However, read below.


- quote -

My parents raised me with the value of education, skills, prudence, and
that has allowed me to be successful. As long as I am alive,
absolutely, I will continue to give the 10K-15K/year.

Self-insurance is ALWAYS CHEAPER -- but the question is, is it
affordable, and, more appropriately, is it diversified? Self-insurance
against fire risk is OK for WALMART -- they have 1000 or so stores
across the country, value of any one store is probably no more than
1-2% of their annual profit for 1 year, etc.. Self-insurance against
fire for my home is NOT OK for me, since I only have once home, and its
value is 30% of my total assets, 400% of my annual profit (aka wage
income + interest), etc.

Right now, I can buy $250K, 10-year fixed term life insurance on
myself, for $135/year. Over 10 year that the protection is desired, the
net cost would be $1350, or $900 in current dollars, at a 4% discount
rate. That, to me, seems a pretty small cost.

- quote -

deja_bhoot2000[at]yahoo.com wrote:
- quote -

I'm not sure I agree - besides the US tax question, you also asked
about "(c) insurance company willing to pay an overseas beneficiary".
If you take out a policy in the parent's country, the beneficiaries
would not *be* overseas. And US tax laws would obviously not apply.

The only possible problem would be paying the premiums, and I expect
that the insurance company would be more than willing to cooperate in
that area!

John Cowart

beliavsky[at]aol.com wrote:
- quote -

Beliavsky,

Thank you for yoru reply, but it appears, just like Bo Peep, you missed
the intent of my question.

Purcahsing an immediate annuity would require I put in 150K right now.
This is akin to transfering 150K to my parents right now. While I can
afford to do that, my preffered plan is to continue to pay them the
$10K to $15K a year, as now. The idea of contigency planning is, what
if I am not there in future? I can put it in my will that $150K from my
estate be sent to my parents. I thought buying insurance on myself
would be an easy way.

- quote -

I do have adequate disability insurance (in fact, the maximum that most
insurance companies are willing to offer is LOWER of (66% of my pay,
6000 per month)). I also have adequate life insurance, for my wife's +
children's needs.

Please see the footnote at the end of the first post in this thread.

"Mark Bole" <makbo[at]pacbell.net> wrote in message
newsTKJg.7174$q63.128[at]newssvr13.news.prodigy.com...
- quote -

I think the OP is being very smart. He has life insurance to protect his
wife and children in the case of his death. This is the same death that you
say is unlikely to happen. Do you think the insurance where his wife is
beneficiary is an unreasonable expenditure? His parents are dependent upon
his income, too, and he only suggests a 10-15 term life policy. I think this
fellow is planning for every financial situation; very fore-sighted of him.

Elizabeth Richardson

deja_bhoot2000[at]yahoo.com wrote:
- quote -

Life insurance on your parents does not make sense, as you say, but
purchasing an immediate annuity for each of them would provide them
life-long income streams. Do such policies exist where they live?

If you go the route of insuring yourself, disability insurance may be
as important as life insurance -- it is really your future income that
you are trying to insure.

Elizabeth Richardson wrote:
- quote -

According to IRS Pub 525, "Life insurance proceeds paid to you because
of the death of the insured person are not taxable unless the policy was
turned over to you for a price. This is true even if the proceeds were
paid under an accident or health insurance policy or an endowment
contract.". This applies to persons subject to U.S. tax law. It
sounds like your parents may not be subject to U.S. tax law, however.

Sending large sums of cash outside of the country probably involves a
whole host of other laws as well that I am not familiar with.

In the end, your whole premise seems pretty flimsy. The odds are very
high you will outlive your parents, according to your own information.
Why insure against an event that is highly unlikely to happen? Just
give them more than 10-15K each year, if it makes you feel better, and
adjust your will accordingly. In other words, "self-insure" -- it's
cheaper.

-Mark Bole

- quote -

I am not a professional, but it is my understanding that insurance proceeds
are non-taxable events. Therefore, no income or estate taxes would apply.
Since taxes are a non-issue, then I don't see why the insurance company
would require a Social Security #. I can't imagine that the insurance
company would care where the beneficiary resides. All they would need is the
information on where to send the check.

Why is it you aren't willing to discuss these issues with an agent?

Elizabeth Richardson

Bo Peep,

Thank you for your reply, but it appears that you totally missed the
context of my message.

The insurance will be ON MY LIFE -- as such, since I am a US citizen,
working and resident in US, I need to have insurance purchase here. So,
again, the plan is:

Person insured: myself (US resident, citizen)
Policy owner: my wife (so the benefits are not subjected to estate
taxes on my death)
Beneficiary: my father / mother (to meet their needs, if I am not
alive).

Bhoot Nath

bo peep wrote:
- quote -

deja_bhoot2000[at]yahoo.com wrote:
- quote -

It seems wiser to me to deal with an insurance company located in the
country where your parents reside, as they would be familiar with the
applicable laws in that country. For instance, if your parents lived in
India, you could work with the largest insurance company in that
country - see
http://en.wikipedia.org/wiki/Life_In...ation_of_India

John Cowart

My parents are retired, live overseas, and are NOT US citizens. I
contribute about 10K to 15K to them each year, for their retirement
expenses (my budget is able to handle this -- see footnote below). As
such, if I were to pass away tomorrow, I would like them to receive
about 200K from my estate. My parents' remaining life expectancy is
about 12 years.

After some discussions, and reading, it appears that buying a 15 year
term policy for 200K or 250K would be an inexpensive way to insure
this. If I am alive, I can keep contribuing to my parents; if I am
dead, they get the proceeds from life insurance.

WITHOUT creating a trust, will the following solution work?
(a) Person insured: Me
(b) Owner of the policy: My wife
(c) Beneficiary of the policy: My father (primary); my mother
(contingent)

By "work", I specifically mean three things:
(a) proceed NOT subject to income taxes in US;
(b) proceeds NOT subject to estate taxes in the US; and
(c) insurance company willing to pay an overseas beneficiary. My
parents DO NOT have US social security numbers (since they are not
citizens or residents). Will this create a problem in designating them
a beneficiary?

Thank you for your suggestions, comments and advice.

Bhoot Nath

Footnote: To avoid a thread diversion about taking care of ourselves
first, I provide the following additional information. My wife and I
are both US citizens, around age 40, with two minor children. Our own
finances are in good shape, with life insurance, disability,
retirement, children's education, etc. all on track. At age 40, we have
accumulated for about 12 to 15 years worth of retirement expenses
(including inflation impact). We hope to reach the "critical capital"
in another 5 to 10 years -- critical capital meaning, enough savings
such that a 4% withdrawal rate, adjusted for inflatation, would be
sustainable for ever (i.e., could choose to retire, if we wanted). Our
assets are in mutual funds, inside and outside 401ks, some DRIPs, some
bonds, emergency cash, etc. No debts, except a mortgage which is less
than 30% of the home value.