Single Payment Life Insurance

{2:12 minutes to read} Some of our clients have expressed a desire to make one payment into a cash value life insurance policy and be guaranteed paid-up. For them, we have a concept called the Single Payment Plan.

Putting one payment into a cash value life insurance policy is a preferred way to fund a policy for some as then they do not have to think about any future payments for the life insurance policy. However, the challenge when you overfund a whole life policy is that you run the risk of the policy becoming a Modified Endowment Contract (MEC), which would then create some adverse tax consequences.

To get around that, we do not put all the money into the life insurance directly. We create a mechanism by which the subsequent payments are made from an account set up for that purpose.

For a hypothetical example, let’s say the policy’s premium is $10,000 a year for 10 years. That would be a total premium of $100,000. Rather than paying the $10,000 a year for 10 years, we make one deposit of $93,587. Then automatically every year for the subsequent nine payments, the premiums will be paid out of the account that we set up. In so doing, the policy never becomes an MEC.

This plan affords the client the security to know that the one payment guaranteed the policy to be paid-up while the contract is structured in a way where it is not an MEC. The client would gain all the benefits and security of having the policy paid-up and not have to worry about ongoing payments. In addition, the policy would perform in such a way that there wouldn’t be any adverse tax consequence.

We’ve been using this concept not only for people that just like the idea of making one payment, but also for parents and grandparents who are looking to make a gift to their children. As we have talked about in prior blogs where they wanted to make a payment of maybe $10,000 a year for 10 years, here is a way for them to just take the present value of those 10 payments and make only one. Please click on the link below to see an example of how the single payment plan works and how it might fit into your situation. Also find a link on the value of whole life insurance. Feel free to call us with any questions.

Single Payment Program                                            The Value of Whole Life Insurance

Registered Representative offering Securities through American Portfolios Financial Services, Inc. (APFS) Member FINRA/SIPC. Investment Advisory Services are offered through G&G Planning Concepts, Inc. which is not affiliated with APFS.

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