From time to time we run across people who have a whole life policy from 35+ years ago...
Why?
It is cheap.
It covers the child their whole life.
It builds cash value.
What people don't talk about is your options 35+ years down the road...
Till now...
You do have options...
You can sell your policy.
You can surrender the policy for its CASH VALUE.
When you surrender and take the CASH VALUE, you can do a 1035 Exchange and defer taxes till it is withdrawn with income. You have the ability to put it in a single pay life policy, an IUL, or an annuity. (All while deferring the taxes.
You can borrow against the CASH VALUE.
You can borrow against the death benefit.
You can receive an accelerated death benefit if you are sick.
A Whole life policies cash value is going to grow at approximately 1.5% which isn't a lot, but it is better than a checking/savings account at a bank. Moving the CASH VALUE to an annuity you have the possibility of growing up to 14% each year. Our companies 10 year average is 8.87% and that is with guaranteed no losses and no hidden fees.
We explain to our customers it is important to never cash a check if you are rolling the money into a new account; annuity, 1035 or another life insurance policy, because you would have to claim that money on your taxes.
We are not tax consultants, and if you have in depth questions about how this can impact your taxes you need to contact your personal CPA. If you don't have one, we do partner with a few in our area.
Don't get us wrong... We love Whole Life policies. These policies are so cheap and they are perfect gifts for kids and grandkids. We just need to make sure they are educated on what they can do with these policies when they are older.
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