fleetwoodjack
Retired parents’ primary asset is set of Mass Mutual whole life policies (one @ $200k, one @ $100k, plus several smaller policies). Total death benefit is approx $480k ($445k basic coverage plus paid-up additions), total cash surrender value approx $290k (less $15k in loans). Dividends have been applied to cover premiums fully in recent years, but 2008 dividends of $11,200 did not quite cover premium total of $11,700. Concern is that if Mass Mutual reduces dividends significantly, parents won’t be able to cover premiums out of pocket. Other than SS, they have no income.
As to ages/health: father is almost 76, health a 4 on a scale of 1-10 (relatively active, e.g., regular golfer who walks the course, but does have a heart condition under management); mother is 74, health a 5 or 6.
Other than covering own living expenses, they have no other particular obligations (e.g., children all grown/independent).
Real concern as expressed by father is "if Mass Mutual reduces dividends to point I cannot afford premiums, what should I do?" He is particularly concerned about possible tax implications of taking cash value or even using some to cover premiums. He wonders whether these policies are a "luxury" that he can afford.
Should they look at using CSV to make up the difference between dividends and premiums and maintain the policies as-is?
Should my father take out small loans against the policies each year if and as necessary to cover any gaps where annual premiums exceed annual dividends? (or at least be prepared to do that as the situation unfolds each year)
Is there a way to set things up with MassMutual such that my father would not get billed for premiums any longer, e.g., that future costs of maintaining coverage would automatically be offset against dividends, with any premium-minus-dividend differential being handled by reduction of cash value and/or death benefit?
What are the tax implications? Are there any immediate tax implications associated with borrowing against the policies, or does borrowing just impact the amount of death benefit/cash value available for later payout? If any scenario involves use of cash value to pay current premiums, would there be any immediate tax implications there?
General question—any thoughts on the outlook for future Mass Mutual dividends? Any sense of that, any way to anticipate? (if dividends were to continue covering premiums, we have no concerns)
What is the best strategy here? What factors should we be considering? What options might there be? Our Mass Mutual rep has been nonresponsive lately, and in any event, we would like independent advice on this. Any guidance would be greatly appreciated. Thanks.
As to ages/health: father is almost 76, health a 4 on a scale of 1-10 (relatively active, e.g., regular golfer who walks the course, but does have a heart condition under management); mother is 74, health a 5 or 6.
Other than covering own living expenses, they have no other particular obligations (e.g., children all grown/independent).
Real concern as expressed by father is "if Mass Mutual reduces dividends to point I cannot afford premiums, what should I do?" He is particularly concerned about possible tax implications of taking cash value or even using some to cover premiums. He wonders whether these policies are a "luxury" that he can afford.
Should they look at using CSV to make up the difference between dividends and premiums and maintain the policies as-is?
Should my father take out small loans against the policies each year if and as necessary to cover any gaps where annual premiums exceed annual dividends? (or at least be prepared to do that as the situation unfolds each year)
Is there a way to set things up with MassMutual such that my father would not get billed for premiums any longer, e.g., that future costs of maintaining coverage would automatically be offset against dividends, with any premium-minus-dividend differential being handled by reduction of cash value and/or death benefit?
What are the tax implications? Are there any immediate tax implications associated with borrowing against the policies, or does borrowing just impact the amount of death benefit/cash value available for later payout? If any scenario involves use of cash value to pay current premiums, would there be any immediate tax implications there?
General question—any thoughts on the outlook for future Mass Mutual dividends? Any sense of that, any way to anticipate? (if dividends were to continue covering premiums, we have no concerns)
What is the best strategy here? What factors should we be considering? What options might there be? Our Mass Mutual rep has been nonresponsive lately, and in any event, we would like independent advice on this. Any guidance would be greatly appreciated. Thanks.