No Load Life Insurance from TIAA-CREF
July 31, 2008 by RickBryan
I came across this post by blogger and financial planner Michael Kitces. Kitces does an excellent job explaining TIAA-CREF’s no-load life insurance contract along with its benefits and down-sides, and even the comments to Michael’s post are informative themselves. It’s not clear to me how extensive the fee-only advisory network is in Manhattan; probably larger than in any other city I would imagine if for no other reason than the population of New York is large and generally wealthier on average than most other cities. It’s hard to see though how fee-only advisors, and therefore TIAA-CREF’s product is ever going to make a significant dent in the marketplace. Marketed under the “Intelligent Life” brand, the prospectus for the VUL and it funds exceeds 1,000 pages, so you’ll have to read Mr. Kitces analysis of the product as I won’t be able to get to this for quite some time. I’m going to reach out to the TIAA-CREF contact for more information and perhaps report back on what I find.
UPDATE: Interestingly, I stopped today at Kitces.com and his site is down. I hope he’s all right.
Who pays the premiums?
July 30, 2008 by RickBryan
There’s some disagreement among lawyers as to whether it’s permissible for the insured to pay the policy premiums directly to the insurance company, or whether the premiums must be paid by the trustee to maintain the trusts’ primary purpose of keeping the life insurance death benefit out of the insured’s gross estate. Read more
Life Insurance Trusts
July 22, 2008 by RickBryan
A trust is a legal agreement between two parties: the person who creates the trust and the person, institution or independent trust company responsible for administering the trust, known as the trustee. The trustee manages the assets placed in the trust for the benefit of the third person, the beneficiary. Read more
Estate of Bosch, 387 U.S. 456 (1966)
July 20, 2008 by RickBryan
Sometimes controversies with federal tax implications are decided at the local (state or county court level) long before the IRS becomes involved.
Read more
ACTEC Videos
July 20, 2008 by RickBryan
The American College of Trusts and Estates Council (ACTEC) is an organization comprised of attorneys (and some CPAs, I believe) who focus all or part of their practices in the area of estate planning. They’ve produced a few videos I think are worth watching. Here’s a link to the videos:
http://www.actecfoundation.org/pages/Publications/default.asp?ID=31
Your First Appointment
July 20, 2008 by RickBryan
Once you have made an appointment to see a lawyer, be sure to bring all documents with you. Think in advance of all the things you own (property, bank accounts, pension plans, insurance policies, annuities, etc.) and how they are currently titled, and their current value. You should also think about the people you would trust to take care of your affairs if you get sick, or after you are gone. And you should be sure to know the spelling of all names of people who are important to you, and their addresses and birthdays.
Controversial Estate?
July 20, 2008 by RickBryan
An important issue to address in designing and drafting an estate plan is whether you anticipate any controversy after death. Unfortunately, as everyone knows, money has a unique way of changing people and relationships, even in the closest of families, after death. What can be done to alleviate this concern, or potential problem?
Beneficiaries as Trustees
July 20, 2008 by RickBryan
A very common situation with an Irrevocable Life Insurance Trust is husband creating the trust and wanting the spouse and/or children to be both beneficiaries and the Trustee. Can you do this? Yes, so long as the Trustees’ authority to distribute income or property to the beneficiary (herself) is “limited to an ascertainable standard.” What does that mean?
Well, the Internal Revenue Code (IRC) in section ___ provides that
Transfer for Value Rule
July 19, 2008 by RickBryan
One of the most important concepts to understand in the life insurance world is the “transfer for value rule.” This rule, which come from Internal Revenue Code sec. 101(a)(2), provides an exception from the usual rule.
The “usual rule” in this circumstance is that the death benefits of life insurance policies are not taxable income; this is Sec. 101(a) of the IRC, and it’s one of the most important to life insurance men and women. The exception to the usual rule is found in IRC 101(a)(2), which provides that where a life insurance policy is sold (“transferred for valuable consideration”), the death benefit is no longer tax free. Instead, only the amount paid for the policy (plus any subsequent premium payments) is tax free; the remainder is taxable. There are a number of “exceptions to the exception,” but transfer for value is a tricky subject which catches many people unaware.
Section 1035
July 19, 2008 by RickBryan
One of the most important Internal Revenue Code (IRC) sections in the life insurance arena is Sec. 1035. In the “non-insurance world,” Sec. 1031 is often used to defer the recognition of gain on the transfer of real property; usually investment real estate.
The general rule is that when you sell property you’re required to pay tax on the gain. “Gain” refers to the difference between what you got for the property when you sold it, and what you paid for it.
In the life insurance world, when a life insurance policy is sold or surrendered, the difference between the surrender value and the cost basis is taxable gain. However, if a new policy is obtained, and the cash value of the old policy “rolled into” the new policy, no taxable gain is recognized. This is the result of Sec. 1035, and it applies to various exchanges of one life insurance policy for another.