4 ms·

"life insurance is hands-down the easiest and lowest-impact way to pass wealth on to the next generation. . . . If you’re retired, your adult children should be

by baking 10y ago

"life insurance is hands-down the easiest and lowest-impact way to pass wealth on to the next generation. . . . If you’re retired, your adult children should be paying the bill for you." Can anyone explain the math and/or logic behind this to me?

hacknat 10y ago
They will get the inheritance money, why should you be paying for it?
- jessaustin 10y ago
  Why don't they just put their money in a bank, or invest it?
  - jamesroseman 10y ago
    Someone can either find a citation for me or dispute this, but the ROI on life insurance is pretty high. The morbid problem is obviously you personally never prosper from it (except in cases where you can borrow against it or use a certain percentage of it to pay for terminal illness coverage).
gwbas1c 10y ago
Because, at that point, life insurance is basically your children's inheritance. Everything beyond what goes to paying burial costs and remaining debt is your adult children's inheritance. If you don't believe in transferring large inheritances to adult children, then there is no point in paying for life insurance beyond funeral costs. What the author didn't explain is that life insurance is a way to avoid inheritance tax. Depending on circumstances, it's cheaper to pay an absurd amount of money for an insurance policy, because the payout to the beneficiaries is taxed differently than a straight-forward inheritance, and thus might, after taxes, result in a better payout.
- baking 10y ago
  I understand the idea of avoiding inheritance tax, but that has become less of an issue with a $5.45M estate tax exemption. Leaving that aside, my question is why would my kids pay for my life insurance as an investment. Assume they have paid of their debts, maxed out their 401k and Roth IRA contributions and they have extra money to invest for retirement. If they put it in the stock market they will pay income taxes and any dividends they receive, which they don't have to pay any taxes on life insurance so I see that. But it still seems to me that life insurance is a bet on when I die and if they are not dependent on my income I don't see why they would want to take that bet. I am 57 and I can get a 20 year term-life insurance for $5k/year with a payout of $250k. If I outlive the policy that is $100k in sunk costs and the next term life policy will be even more expensive. Whole life makes even less sense at my age. The only way this makes sense to me is that if you had a whole life policy that you started wen your kids were younger and now you are retired and can't afford the payments do you cash it out? Well, if I cash it out then maybe I end up spending it or the nursing home gets it, but if my kids take over the payments then they get the benefit (unless the nursing home still takes it.) This still assume I bought whole-life 20 years ago which everyone at the time told me was a sucker's bet so I'm still not sure that this makes any sense.

by baking 10y ago

hacknat 10y ago

They will get the inheritance money, why should you be paying for it?

jessaustin 10y ago
Why don't they just put their money in a bank, or invest it?
- jamesroseman 10y ago
  Someone can either find a citation for me or dispute this, but the ROI on life insurance is pretty high. The morbid problem is obviously you personally never prosper from it (except in cases where you can borrow against it or use a certain percentage of it to pay for terminal illness coverage).

gwbas1c 10y ago

Because, at that point, life insurance is basically your children's inheritance. Everything beyond what goes to paying burial costs and remaining debt is your adult children's inheritance. If you don't believe in transferring large inheritances to adult children, then there is no point in paying for life insurance beyond funeral costs. What the author didn't explain is that life insurance is a way to avoid inheritance tax. Depending on circumstances, it's cheaper to pay an absurd amount of money for an insurance policy, because the payout to the beneficiaries is taxed differently than a straight-forward inheritance, and thus might, after taxes, result in a better payout.

baking 10y ago
I understand the idea of avoiding inheritance tax, but that has become less of an issue with a $5.45M estate tax exemption. Leaving that aside, my question is why would my kids pay for my life insurance as an investment. Assume they have paid of their debts, maxed out their 401k and Roth IRA contributions and they have extra money to invest for retirement. If they put it in the stock market they will pay income taxes and any dividends they receive, which they don't have to pay any taxes on life insurance so I see that. But it still seems to me that life insurance is a bet on when I die and if they are not dependent on my income I don't see why they would want to take that bet. I am 57 and I can get a 20 year term-life insurance for $5k/year with a payout of $250k. If I outlive the policy that is $100k in sunk costs and the next term life policy will be even more expensive. Whole life makes even less sense at my age. The only way this makes sense to me is that if you had a whole life policy that you started wen your kids were younger and now you are retired and can't afford the payments do you cash it out? Well, if I cash it out then maybe I end up spending it or the nursing home gets it, but if my kids take over the payments then they get the benefit (unless the nursing home still takes it.) This still assume I bought whole-life 20 years ago which everyone at the time told me was a sucker's bet so I'm still not sure that this makes any sense.