Often when a person gets into their 70’s, life insurance choices have to be studied more carefully. In most cases there is only one term option left, the 10 year term insurance. If that doesn’t work for you, the only other practical option is a universal life with a no lapse guarantee, a cashless permanent policy.
I was reading an article about our ever changing mortality statistics. We’ve come a long way since the day when making it into your late 70’s was considered a ripe old age. Newer studies show that if you are still healthy at 65, making it to 85 or 90 is a pretty good bet.
So, back to the choice of 10 year term. This article cited the Tillinghast Older Age Mortality Study. The conclusion it came to should put a huge asterik of concern next to any 10 year term quote for someone over 70. The primary conclusion for owners of 10 year term policies was that “mortality experience through years 11-15 was 215% of mortality in years 6-10.
This is OK if you truly planned and knew that the need for the insurance was taken care of by the end of the 10 years, but if you bought it because it was cheaper, you likely made a mistake.
Bottom line. Consider carefully when you get to your 70’s just exactly what the best direction is. Don’t bust your budget, but one thing you may want to weigh is whether having $250,000 of 10 year term is better than say, $150,000 of permanent insurance. You are weighing less benefit against the risk of outliving all of the benefit.
March 8th, 2008
However the elections shake out, congress and the new president will be dealing with the estate tax issue over the next year. Already a myriad of options have been thrown into the hopper. Amost no one and none of the proposals point to the elimination of the federal estate tax.
The good news in all of this as I have discussed in previous posts is that in the past 10 years the law will have evolved from the estate battering $600,000 exemption that ruined the life’s work of so many hard working people. Where that evolution ends remains to be seen, but there is little doubt that it will be a far fairer treatment than where we started.
Here is a list of the current ideas floating about DC.
- HR 1929 and S 1994 introduced by the Salazar brothers of Colorado would exclude farms from estate taxes as long as the farms remain farms. This is my home state and personally I think these two need to recognize that only about 1% of those impacted by estate taxes are farmers and ranchers. Unfortunately for the rest of us they both wear cowboy hats and they can’t seem to see beyond that.
- HR 3170 comes from democrat Harry Mitchell of Arizona. It would raise the combined exclusion to $5mm from the 2009 limit of $3,5mm over a six year period.
- HR 3475 from democrat Michael Capuano of Massachusetts would increase the exclusion to $5mm in 2010. No phase in period.
- HR 4235 from democrat Nita Lowey of New York would change the exemption to $3mm immediately, bypassing the increasing to $3.5mm in 2009.
- HR 4042 from democrat Gerald McNerney of California would increase the exemption a year early to $3.5mm and establishes 45% as the maximum estate tax rate.
- HR 4172 from democrat Dennis Moore of Kansas again increases the exemption to $3.5mm a year early and indexes the exemption amount for inflation after that.
- HR 4242 from democrat Earl Pomeroy of North Dakota make the exemption $3mm for 2007 and 2008, $3.5mm for 2009 and beyond. It freezes the maximum tax at 47% for taxable amounts in excess of $2mm.
It seems to me there are a lot of very good options being considered. Obviously none of it will happen before the elections, but, with the exception of my two cowboy legislators from Colorado, all of the proposals are huge improvements over where we were 10 years ago. My personal opinion is that indexing for inflation will fix the problem for the future.
Will there still be a need for survivorship or second to die life insurance? I think it will still play a pivotal role, but most of these proposals would eliminate smaller estates from needing that kindof protection.
Bottom line. 2009 will be an interesting year. I personally am very optimistic and hopeful about the changes in estate tax law and I think the direction of the country in general.
March 8th, 2008
