UL for Tax Reasons
The insured, a widow, lives in a medium-sized northeastern city. She was married for 61 years, but lost her husband in 2008 after a lengthy illness; she still has a daughter, a son, and five grandchildren. She and her husband owned a small chain of dry cleaning establishments, building it up from one storefront in 1962 to a total of 12 throughout the city. She is also very active in her church, and contributes both her time and money to various charitable causes under the aegis of the church, including foster homes, food pantries, and youth centers for girls.
After selling the business, she put half a million dollars into an education fund for her grandchildren and took out a universal life policy for RMD maximization, as well as for other tax and lifestyle reasons. The face amount was $2 million. With the recession beginning to kick in, she also wanted to protect her children (both teachers) and their families in the event of her passing. Fortunately, both families came through the recession relatively unscathed, with her eldest daughter’s husband doing quite well in his IT and Internet business.
A few months ago, her health was beginning to deteriorate, and, not wanting to burden her children, she sold her home and moved into an independent living facility. Being an excellent businesswoman, she had always managed her own money, but she also consulted her tax attorney, whom she used as her financial confidant. Her universal life policy had a cash value of $83,175, but a surrender value of under $1,000.
Together, she and her tax attorney decided that with a yearly premium of over $81,000, a life settlement to pay for her rent and expenses at her residence, as well as continuing to contribute to her church, without having to use the money set aside for her children and grandchildren, would be an optimum financial decision. They contacted The Lifeline Program®, and we were able to unearth $110,000 from her universal life policy, which she now has in the bank; we assumed all future monthly premium payments, relieving her of that financial obligation.
**While the storyline contained in this case study is a dramatization so as to protect the identity and privacy of the policy holder and insured, the policy face amount, age of insured, and policy sale amount realized are actual results of settlements offered by The Lifeline Program®.