Who here does estates and trust law? Any recommendations?

[gh1950]

I only found that out after I asked for help. My brother who is a lawyer finally got back to me. He told me that he completed the paperwork for a couple of his insurance policies, in addition, I received another insurance claim form.

This form said that the funds would be reported as taxable. Considering the amount of money involved in this policy alone ~2X the $ of my first house. I was looking to see if I could drop it into a trust, and pay the taxes when it was disbursed.

The insurance company is going to write the check to whoever is named the beneficiary on the policy. Nothing you can do can stop that.

There is a confusion in terminology. A life insurance company wrote the policy, but it's not an insurance policy. From what you are saying, it's a deferred income annuity, which is taxable to the beneficiary. There probably is not much you can do to avoid the tax hit, except incur some offsetting deductible expenses. Maybe there's a Vegas trip in your future you don't know about.

You should at least consult with a tax attorney, or a really good CPA for peace of mind. You don't have a estate problem, so no need to go in that direction. At least you can develop a tax strategy for what's left over.

FWIW, and don't take this personally. but you are seeing why most financial advisers advise that annuities only benefit the insurance company. I say that with the knowledge that my father was able to successfully use an lump sum pension payout to fund an annuity that supported my mother for years, because of the age difference in the two. Outside of special circumstances such as that, annuities are terrible investments. (IMO, i am not giving investment advice.)

 

[NDIrish1]

Legal Eagle is a great guy who can help steer you in the right direction

 

[rockyfatcat]

The insurance company is going to write the check to whoever is named the beneficiary on the policy. Nothing you can do can stop that.

There is a confusion in terminology. A life insurance company wrote the policy, but it's not an insurance policy. From what you are saying, it's a deferred income annuity, which is taxable to the beneficiary. There probably is not much you can do to avoid the tax hit, except incur some offsetting deductible expenses. Maybe there's a Vegas trip in your future you don't know about.

You should at least consult with a tax attorney, or a really good CPA for peace of mind. You don't have a estate problem, so no need to go in that direction. At least you can develop a tax strategy for what's left over.

FWIW, and don't take this personally. but you are seeing why most financial advisers advise that annuities only benefit the insurance company. I say that with the knowledge that my father was able to successfully use an lump sum pension payout to fund an annuity that supported my mother for years, because of the age difference in the two. Outside of special circumstances such as that, annuities are terrible investments. (IMO, i am not giving investment advice.)

I know enough to know that I don’t want anything to do with insurance other than automobile, aircraft, homeowner, and term life.

When my father received his share of the inheritance 30 years ago. He quit work and went back to school to finish a masters degree in finance. We hadn’t talked in years. I’m sure he knew exactly what he was doing, financially anyways.

 

[WallsGa]

K knifestuff is a specialist in this

 

[Legal Eagle]

Legal Eagle is a great guy who can help steer you in the right direction

Thank you sir!

 

[rockyfatcat]

I know enough to know that I don’t want anything to do with insurance other than automobile, aircraft, homeowner, and term life.

When my father received his share of the inheritance 30 years ago. He quit work and went back to school to finish a masters degree in finance. We hadn’t talked in years. I’m sure he knew exactly what he was doing, financially anyways.

I’m going to call the insurance company tomorrow and find out exactly what this policy is. Insurance or annuity

 

[rockyfatcat]

I’m going to call the insurance company tomorrow and find out exactly what this policy is. Insurance or annuity

I got off the phone with the insurance company. (Very frustrating)

When my dad set up this policy was set up he wrote a big check up front to set up this investment.

The difference between the initial check and the current balance is 'gains' which is taxable.

So not knowing what the initial balance was or what the tax rate will be leaves me with an unknown tax liability which will be reported as taxable

 

[87KJH]

I got off the phone with the insurance company. (Very frustrating)

When my dad set up this policy was set up he wrote a big check up front to set up this investment.

The difference between the initial check and the current balance is 'gains' which is taxable.

So not knowing what the initial balance was or what the tax rate will be leaves me with an unknown tax liability which will be reported as taxable

Not a tax advisor, but is there a way to roll it into another tax deferred investment account?

 

[BillsCamino]

Your avatar is ironic....

 

[gh1950]

I got off the phone with the insurance company. (Very frustrating)

When my dad set up this policy was set up he wrote a big check up front to set up this investment.

The difference between the initial check and the current balance is 'gains' which is taxable.

So not knowing what the initial balance was or what the tax rate will be leaves me with an unknown tax liability which will be reported as taxable

Correct.

But if your father used pre-tax dollars to fund the account, those dollars are coming to you tax free. You are only paying the tax on the gain, which in a climate of 2% interest isn't going to be much.

You don't really have problem.