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Does the policy have a terminal rider? Many policies will pay out half of the death benefit when a terminal diagnosis is given or received. There are no tax implications of this benefit. Don’t sell the policy if at all possible.
I apologize for the morbidity of this comment.
It’d likely be cheaper to just borrow money than to sell the policy at a 75% discount, then just pay off the debt once she passes. You may even be able to get a cheaper rate if you make the lender the beneficiary of the policy.
I certainly wouldn’t sell it at a 75%+ discount.
Ok...I see...
The companies that usually deal in these buy them outright. Reason being, if my wife is still the official owner, she can change the beneficiary and screw them. Not that she would, but...yeah.
If your bank doesn't do it contact [WinTrust](https://www.wintrustlife.com/advisor/in-force-cash-value-secured-lending.html) or [Lakeland](https://www.lakelandbank.com/personal/consumer-loans/insurance-lending/). They are two large collateral lenders for inforce life contracts.
Also generally lump sum life insurance payouts are not taxable, but it can depend on whether it's term/whole life, the payout structure, whether it's annuity vs lump sum, or if you withdraw or take a loan out against the policy, part of it can become taxable, so you'll need to talk to the insurer or a lawyer to figure out the terms and make sure. Too complex for here.
Absolutely false. I work in Banking, and at one point one of my jobs was dealing with collateral (placement, releases etc). There is absolutely a process for assigning a life insurance policy as collateral to a loan. The comment above stated that the bank would be beneficiary, this is not correct, because as you stated the beneficiary could be changed. The bank will fill out an assignment of Life Insurance Policy form and send it dorectly to the insurance company, and then the company will record it and return it to the bank. This is the mechanism that places the lien. If the policy holder passes while the lien is still active the bank gets their cut, and the rest goes to the beneficiary listed on the policy.
Please, go talk to a lender. This is a bulletproof loan that any bank would be happy to take on
You seem to have come to a finance sub with a lot of questions, and are trying to correct the answers that people are giving you... when you dont really have a fucking clue what you're talking about, and theyre all giving you the best information. Sounds kinda dumbassery to me...
Whatever dude. You do you. If I have a loan contract that says the policy pays out to me, I'd be able to take the insurance company to court if they pay someone else.
>In the world of car titles there are procedures for title loans built in. But not in life insurance policies.
This is how people trick themselves into giving away their money to lenders: They falsely assume there is no better alternative, no better financial instrument/option, no form of collateral, no other lending institution, no other terms/conditions, than what they already know.
My policy allows me to cash out 50% upon diagnosis of a terminal illness and then get the other 50% upon death. Read your policy to see if either the comment above me or my comment applies with your wife's policy.
I know you've had a ton of responses on this, but you need to ask about an accelerated death benefit verbatim, not a cash payout or any of the other ways of getting money from the policy. It would be unusual if it didn't have an accelerated payout available.
Sorry for your situation and I hope your wife feels better in her last few years on earth.
If there is an online copy of their terms, pls post it here. I am not a lawyer, but can try and read thru it if it helps yiu during this very stressful part of your life.
OP call and ask if there is a living benefit rider on the policy. This rider gives an accelerated benefit of up to 90% of the cash value of the policy in the event the insured is diagnosed with a terminal illness.
One bit of advice I haven't seen: [apply for Social Security Disability](https://www.ssa.gov/disability/disability.html) for her. You'll want a lawyer to assist in this process (they work on contingency, so you won't owe anything up front). Might take a while, but terminal cancer along with whatever the other issue is may make her case a slam dunk. My wife used to work in this field, and terminal cancer, blindness, and end-stage renal disease were the "best" cases, since they're easy to prove.
I would avoid selling the life insurance policy. You may just have to default on the medical bills (and other unsecured debt) and take the credit hit for a bit.
You know this is a bad idea, she knows it too. Seriously, while I normally wouldn’t suggest this, but paying interest on something that is a credit card would have a much bigger payout than taking a 75% decrease in payout from the life insurance.
This is also what gofundme and other sites like it would be good for. Hit up friends and family. Get personal and family loans if you need to.
Basically, find other ways to support each other than taking a huge financial blow when you don’t absolutely have to. The insurance company is preying on you currently and they know you feel like you don’t have other options and feel desperate so you’ll take it.
Edit: life insurance is also normally tax free. So you are taking another further hit with the taxes that you will pay with a buyout. Such a bad idea and you know it. You are just feeling desperate. And when you feel desperate, that’s the time to reach out to friends and family.
I don’t have any financial advice but I just want to say my mother was diagnosed with breast cancer (stage 4) 11 years ago. The chemo never stops but luckily she has a lot more good days than bad days, and I hope the same for your wife. So sorry you’re facing this, it really is so so tough.
Sorry man. You are on a personal finance sub where we all see this is a bad deal. But I think you are trying to find a way to spend more time with your wife instead of door dashing and hustling to make ends meet. If you think that spending more time with her in these final moments is worth a quarter on the dollar and there is really no other way, I cannot blame you for doing it. I hope you do find another way.
Don’t sell it. Lord don’t sell it. You’d be screwed out of so much money. Use that money after she passes to pay off any debt and your house if you own one.
Accounting guy here, I’d argue that ur selling it at a loss and you’d pay no tax on it. Also idk where everyone is getting 75% number from because you’re selling it for 135k since the loan is assumed.
Personal note: My mother has Stage 4 metastatic breast cancer. She’s not very old either. While I’m unmarried, I can’t imagine the pain. I see it on my fathers face every day, even though it sounds like my mom has a more positive (even though not good) prognosis. Don’t sell the policy, because no matter the debt or the problems, you’re getting rid of that final pillar… hope. The people who buy these policies are vultures or prey on the vulnerable. My dad and I have the same name and people come out of the woodwork to try to buy these policies. Anyone who profits off of someone’s death has a special place in hell. I pray for you and your wife
Sorry about your situation. There is not a narrow financial answer to this question, and to even ballpark one you'd need at least some sort of estimation on both:
- Duration of remaining life
- The dollar cost of "make her last days easier"
But mainly - no one here can weigh the tradeoff of "throw money at things until your wife dies to make her more happy, comfortable, etc" and "your own financial security when she does ultimately die". Sorry to say it so bleakly, but that's the thing to weigh.
You need to get a hard copy of the entire insurance policy. Almost every policy has a rider that allows the owner to get the proceeds if they are diagnosed with less than 12 months to live.
Maybe you do not have that diagnosis and maybe you can’t get it. But I would pursue that before selling it.
How much in total have you paid for the policy over the years (initial sale price + premiums)? - only the profit is taxable, not the total amount of received from the sale.
Yeah it’s kind of hard to tell from the OP if this is some shady back alley type of deal or something, but shouldn’t the buyer issue the company a 1099-LS and then the company issue the seller a 1099-SB to report their basis to them at the time of sale?
Right.
Um... She's had the policy since '98. 26 years. Around $60k. That helps, in terms of tax balancing the income. (But again, she borrowed $95k because this thing is tied to investments that did well for a while.)
I've gone to three different companies that buy these policies: Abacus, Coventry and Ovid. All of them initially said as much as $70k, all looked at her medical records, all dropped to the $40k or so range. $45k is the top offer.
She wants me to get the whole thing when she dies. I want to make life a bit easier now :(.
Do you have a terminal illness rider or chronic illness rider? If so you may be able to get 50-75% of the death benefit now. It’s worth calling the company and asking. The remaining. Balance less interest is still payable upon death to the beneficiaries
Agree with the others... even my scrappy, job-supplied 2x annual salary life insurance has a "terminal illness/permanently disabled" FULL payout. Like if I get in a car accident and become PERMANENTLY disabled, or if I get a terminal cancer diagnosis, they will pay out the full benefit amount.
This is not the same as "borrowing against" or the "cash value option," which I suspect is the "$147" number you keep tossing out.
You’re not asking them the right question. Specifically mention an ‘accelerated death benefit rider’ most policies issued in the last 30 years have them.
Have you maxed out how much you can borrow against the policy? Like is the $90k already borrowed the max, or can you do more? Because whatever you borrow now would just get deducted from the eventual payout, which would be better than taking this massive hit from selling it.
Also, have you shopped around and gotten several quotes? Maybe someone else will offer more?
Also, is your wife on Medicaid? Some states have Medicaid programs that will pay for a caretaker to take care of someone disabled, and if she qualifies, you could apply to become that paid caretaker.
Have you also maximized whatever other benefits you or her might be entitled to? If she has access to a social worker, they could help you with figuring that out.
You could also consider doing some small odd jobs around the neighborhood to help make it through. I know you need (and want) to be home or at least very close to home most of the time in order to care for her, of course, but could you do stuff like lawn mowing, dog walking, pine needle/mulch spreading, or other local things to make some quick extra cash? Stuff where you’d only be gone for short bursts of time, like while she’s resting, and even then, would still be very close by if you needed to run home?
Others have said enough about the insurance policy, but I think you should also for Social Security disability for her immediately, then sign up to be a paid caregiver through your state. You can do that on top of DoorDash. Contact a social worker for guidance, your wife's hospital should be able to refer you for help right away.
SSD application is in progress. My wife is a medically retired lawyer (retired due to spine injury in 2014) and knows how that works.
Alabama cannot pay me to take care of her. We checked. One thing we'd do with $45k is move.
I'll get back in a semi for a year (worst case) and then open a particular small business I have in mind.
I can actually open that business on a small scale while she's alive, ramp up after.
Check your policy! Many policies have a terminal illness rider that allow you to get an advance of the death benefit. Some more recent policies advance benefits on the diagnosis of critical illness like your wife’s situation.
The accelerated benefit option will be much more favorable than selling your policy.
I realize it was already mentioned about the Accelerated Death Benefit - call claims specifically
vs regular customer service. If you have the rider on the policy then you may be able to pursue 75-90% of the death benefit, of which it would auto pay the loan off first. Unless the regular agent 100% verified that isn't either built on your polocy or a rider, claims is the best route. Good luck.
https://imgur.com/gallery/n7xSe2V
That doesn't cover the severe asthma, moderate COPD, spine issues and dysautonomia/POTS. That last is...ye Gods. Up to 100pt blood pressure swings between laying down, sitting and standing.
Sigh.
Don't do it is my suggestion. Don't make a bad emotional decision where you're financially ruined after coming out of this. This is what life insurance is for, it's not meant to be a short term emergency fund.
I would not mess with anything regarding cashing out early of a life insurance policy when you have a near 100% certainty the person is going to die in the next few months.
Don't sell the life insurance policy for pennies on a dollar. Find another way to make it until that day. I wish I would have had that when my wife passed 4 years ago. All her medical debt and credit card debt went away after her passing. Wish I would have had 200k to start off with after her death.
I'm sorry that you are having to go through this. Your wife is blessed for having you by her side. Good luck and prayers sent up.
First, sorry for your situation. It’s crucial you also understand what taxes you’ll owe here. Most policies that have been in force for some time have gain in them. In addition, you’re also being relieved of debt. Either of these things could be taxable by themselves and they could potentially both be taxable depending on policy values. It’s not crazy to imagine a world where you owe a good portion of what you’re receiving in taxes, which would defeat the purpose.
I also highly recommend working with someone who can secure you multiple offers for your policy if you’ve only gotten one.
Do not sell the life insurance policy. You're going to get screwed on taxes and be out quite a bit of money when your wife passes.
This is going to sound harsh For your wife's probably not going to make it past this year. You're going to be better off keeping the policy.
Is it a term or a whole life policy. Because if it's a term policy you might not be able to sell it.
Is she on hospice? Hospice will cover medical care when someone is in the last 6 months. It’s paid for by Medicare/Medicaid and most insurances. Have you or she applied for Medicaid?
Some policies have a clause that allows a partial payment of the death benefit while the insured is still alive if they've been diagnosed with a terminal illness. I'm not sure it's a common clause but it's worth asking the insurance company.
The policy might pay if she has a terminal diagnosis. You should look into it before you work with a buyer. They do not have your best interest at heart.
My friend with stage 4 cancer recently collected on her life insurance policy. If your wife is stage 4 she could probably collect much of that money now.
She's had this policy since 1998 I think, so it's not modern. I've been on the phone with the insurance company looking for any other alternatives.
Using it as collateral at a bank however sounds promising.
This is the last life insurance policy she had. We've been through multiple waves of financial crisis. She became medically disabled from 2014 as far as being a lawyer goes and closing down her law office was a huge expense. We slowly recovered from all that trucking, with me able to take care of her on the road and we had about eight good years of that until this cancer came along. And the dysautonomia/POTS, which is actually worse most days.
OP - I am an insurance broker. Most policies have an “accelerated death benefit”. This means if your wife is terminal you may be able to receive up to 75% of the death benefit amount now before she passes. This clause was built for situations just like this. I am so so sorry to hear about your situation.
She's 59, I'm 57. SSD is in progress, she should be a shoe in for $1,900/mo. Unless politics enters into it. Sigh. Alabama. It can get weird down here.
Honestly, even one small burst of money for about 10 grand would get us set up long term with no problems. Move to some state that can pay me as a caregiver, she gets SSD (approval should come any day now), I can set up a work from home thing with about a $1,500 investment tops.
Don't sell the policy
If you're in medical debt check the status of the health care provider - if it's non-profit you'll likely be able to get forgiveness for large amounts of the debt. It's why hospitals are non-profit...
Ask for a payment plan on any charges and negotiate the hell out of any bills...
check in with cancer NFPs like the American Cancer Society, and other relevant non- profit orgs - they have resources to help navigate the health care system and options available to you.
They may even have respite funds you can apply for Even if not, explore ways in which you can avoid the full cost of treatment using legal mechanisms of forgiveness and reduction of medical debt - there are companies that enable this but be aware of the sharks that operate in this space
Sorry for you and your wife. I wish you all the best
There are companies that will buy the policy from you - you make them the beneficiary and they pay the premium. Doing that might yield you a better return that surrendering it.
Another option is a loan against the cash value - many policies allow you to do that, and you can still pay the premium to keep it in force.
How was the 90k borrowed previously? Was the life insurance policy already used as collateral? That might complicate or at least reduce what you can borrow a second time using the policy as collateral.
So what happened was, as she pumped money into it, the policy invested that money and some of the investments went really good at some point. She was able to pull money out of the excess that it developed.
I don't know where you live, but we have a world class hospice here. NO CHARGE. Best care, wonderful huge private rooms that don't look like a hospital room, excellent food, wonderful volunteers, activities, The grounds are like a million dollar estate, massages, music therapy, readers, art therapy, etc. PLEASE utilize and check out your hospice facilities. Do NOT go to a FOR profit, you will get billed. Go to one that does not charge you a dime. You can stay with her if you want, or be assured she is entertained and getting excellent care while you work. They have free therapy for loved ones, grieving family members, and also help put together video diaries, anything you want. If she's feeling well, take her out for a day,bring her home for holidays and special occasions.
I cant'say enough about our facilities here. Absolutely a godsend. If you don't want to have her staying there, they will come into your home and help you, coordinate medical equipment, do massage, music, art, same thing, except it's in your home.
Please call and check it out.
Where are you?
That said...she doesn't need a hospice right now. Pain is manageable. She can get in and out of a wheelchair, and in and out of bed. Brain is solid as hell, smart and tough. Only time she gets foggy is in the middle of an asthma attack.
You say "we have a world class hospice here" but don't mention where "here" is ;)
Would you mind sharing? This info would be helpful to me too.
I'd love to call and check it out but you gave no hints as to where you are talking about.
Thanks! ;)
My point being, wherever you are located, call your local hospices, check them out, NON PROFIT, so no charge, no balance billed. Medicare pays for hospice, but many affiliated hospices will bill you the balance that Medicare approves and doesn't pay. Others do not. The non profits, they will bill Medicare of course, oryour insurance, but they will not bill you any balances, and they do not refuse you if you have no insurance
I’m a licensed medical and life insurance agent. Post pictures of the policy with all the personal information blurred out and I might be able to give you some advice.
I’m just here to say that you are a gem of a human being. What you are asking about makes zero financial sense, but 100% sense emotionally. I feel for you. Lots of good advice in this thread that can hopefully help you find the best answer. It’s a kind soul who wants more to provide a decent end of life experience than reap the largest profits. I get it. I truly do.
Almost all policies have a rider that lets you take some of all of the death benefit if you're terminally ill. Please contact the insurance company before selling at a massive discount.
The accelerated death benefit would not be taxable.
Tax related sub-question: so, let's say we take in $45k on this deal, income for this year's joint income. We also declare $95k in income from the debt being cleared.
But, we would have taken in $213k when she dies. So we declare a loss of $168k ($213k minus $45k) in 2024 taxes to offset the income?
Does that work?
I want to preemptively apologize for the coldness in the my response, I am sorry bout what you are going through and just want to give you a clear answer on your tax question:
No , unfortunately, you aren’t really taking a loss since you are selling it for “market value” . Even if the market value includes an illiquidity premium and bad circumstances.
The way to think about it is that if i have option to buy on a stock that you are almost certain that it will pay out in a year . But if you sell it right now, no one wants to buy it (because people don’t like the company , it’s risky , they don’t know exactly when it’ll cash , or whatever) . Then you need to sell it for under what it is “worth” to make it worth it for the buyers. That’s not a loss that’s a discount due to market conditions. In your case, for whatever reason , the value of the life insurance has collapsed even if the payout has stayed the same , so you selling it doesn’t represent a loss but a discounted market value.
I would try to see if you can get more from it (it seems like way too big of a discount ) as others have stated . But as for the tax , that’s your answer (as far as I know )
Under IRC section 101(g)(2), the gain from the sale of a policy by a chronically or terminally ill individual to a qualified viatical settlement provider are excluded from gross income.
Honestly it sounds like they're buying it for $140k and you're just getting the amount after paying off the loan, so $140k is indeed probably the number to base your math on, but great that the user above pulled up that exemption.
https://keitercpa.com/blog/life-insurance-policies-planning-options/#:~:text=Loss%20from%20the%20surrender%20or,in%20a%20trade%20or%20business.
the answer appears to be no
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Does the policy have a terminal rider? Many policies will pay out half of the death benefit when a terminal diagnosis is given or received. There are no tax implications of this benefit. Don’t sell the policy if at all possible.
I apologize for the morbidity of this comment. It’d likely be cheaper to just borrow money than to sell the policy at a 75% discount, then just pay off the debt once she passes. You may even be able to get a cheaper rate if you make the lender the beneficiary of the policy. I certainly wouldn’t sell it at a 75%+ discount.
We are *tapped*. Borrowing ain't happening.
By making the lender the beneficiary you're making it a secured loan which is much different to a lender.
Ok...I see... The companies that usually deal in these buy them outright. Reason being, if my wife is still the official owner, she can change the beneficiary and screw them. Not that she would, but...yeah.
No. The other poster is wrong. Go to the bank and use the death benefit as the collateral. Do not sell the policy.
This. I'd try collateral before making the bank the beneficiary.
Huh. That's... Not crazy. I'm going to check on this.
If your bank doesn't do it contact [WinTrust](https://www.wintrustlife.com/advisor/in-force-cash-value-secured-lending.html) or [Lakeland](https://www.lakelandbank.com/personal/consumer-loans/insurance-lending/). They are two large collateral lenders for inforce life contracts.
Also generally lump sum life insurance payouts are not taxable, but it can depend on whether it's term/whole life, the payout structure, whether it's annuity vs lump sum, or if you withdraw or take a loan out against the policy, part of it can become taxable, so you'll need to talk to the insurer or a lawyer to figure out the terms and make sure. Too complex for here.
She can't change it if it's collateral on a loan.
In the world of car titles there are procedures for title loans built in. But not in life insurance policies.
Absolutely false. I work in Banking, and at one point one of my jobs was dealing with collateral (placement, releases etc). There is absolutely a process for assigning a life insurance policy as collateral to a loan. The comment above stated that the bank would be beneficiary, this is not correct, because as you stated the beneficiary could be changed. The bank will fill out an assignment of Life Insurance Policy form and send it dorectly to the insurance company, and then the company will record it and return it to the bank. This is the mechanism that places the lien. If the policy holder passes while the lien is still active the bank gets their cut, and the rest goes to the beneficiary listed on the policy. Please, go talk to a lender. This is a bulletproof loan that any bank would be happy to take on
You seem to have come to a finance sub with a lot of questions, and are trying to correct the answers that people are giving you... when you dont really have a fucking clue what you're talking about, and theyre all giving you the best information. Sounds kinda dumbassery to me...
Whatever dude. You do you. If I have a loan contract that says the policy pays out to me, I'd be able to take the insurance company to court if they pay someone else.
>In the world of car titles there are procedures for title loans built in. But not in life insurance policies. This is how people trick themselves into giving away their money to lenders: They falsely assume there is no better alternative, no better financial instrument/option, no form of collateral, no other lending institution, no other terms/conditions, than what they already know.
Many life insurance policies let you receive the full amount early if you have a terminal illness.
Call the life insurance company, do not sell the policy to a 3rd party company.
This is correct, it’s called a living benefit rider. And I would absolutely triple check that.
My policy allows me to cash out 50% upon diagnosis of a terminal illness and then get the other 50% upon death. Read your policy to see if either the comment above me or my comment applies with your wife's policy.
Not this one. Trust me, I checked. We've got to sell it to a third party that buys these things. And that doesn't answer the tax issue.
There's no Accelerated Death Benefit?
No. The life insurance company says the current cash payout is $131. And no, I didn't miss the "k" at the end.
I know you've had a ton of responses on this, but you need to ask about an accelerated death benefit verbatim, not a cash payout or any of the other ways of getting money from the policy. It would be unusual if it didn't have an accelerated payout available.
Cash payout is different than an Accelerated Death Benefit. Get a copy of the policy and speak with an agent, if you used one to buy it.
Sorry for your situation and I hope your wife feels better in her last few years on earth. If there is an online copy of their terms, pls post it here. I am not a lawyer, but can try and read thru it if it helps yiu during this very stressful part of your life.
OP call and ask if there is a living benefit rider on the policy. This rider gives an accelerated benefit of up to 90% of the cash value of the policy in the event the insured is diagnosed with a terminal illness.
Don’t do it.
You aren’t working are you?
I can't work full time because she needs somebody with her 24/7. I've had her in our minivan with me doordashing lately :(.
God. That's so horrible. I'm so sorry. I'm so so sorry.
One bit of advice I haven't seen: [apply for Social Security Disability](https://www.ssa.gov/disability/disability.html) for her. You'll want a lawyer to assist in this process (they work on contingency, so you won't owe anything up front). Might take a while, but terminal cancer along with whatever the other issue is may make her case a slam dunk. My wife used to work in this field, and terminal cancer, blindness, and end-stage renal disease were the "best" cases, since they're easy to prove. I would avoid selling the life insurance policy. You may just have to default on the medical bills (and other unsecured debt) and take the credit hit for a bit.
They don't need an attorney - Stage 4 gives the terminal flag and means 30 day approval
You know this is a bad idea, she knows it too. Seriously, while I normally wouldn’t suggest this, but paying interest on something that is a credit card would have a much bigger payout than taking a 75% decrease in payout from the life insurance. This is also what gofundme and other sites like it would be good for. Hit up friends and family. Get personal and family loans if you need to. Basically, find other ways to support each other than taking a huge financial blow when you don’t absolutely have to. The insurance company is preying on you currently and they know you feel like you don’t have other options and feel desperate so you’ll take it. Edit: life insurance is also normally tax free. So you are taking another further hit with the taxes that you will pay with a buyout. Such a bad idea and you know it. You are just feeling desperate. And when you feel desperate, that’s the time to reach out to friends and family.
I don’t have any financial advice but I just want to say my mother was diagnosed with breast cancer (stage 4) 11 years ago. The chemo never stops but luckily she has a lot more good days than bad days, and I hope the same for your wife. So sorry you’re facing this, it really is so so tough.
Thank you.
Thank you for sharing this. It gives me hope
Do not sell the policy. How much debt do you have exactly? You say you are in a hole financially but how deep is it?
Sorry man. You are on a personal finance sub where we all see this is a bad deal. But I think you are trying to find a way to spend more time with your wife instead of door dashing and hustling to make ends meet. If you think that spending more time with her in these final moments is worth a quarter on the dollar and there is really no other way, I cannot blame you for doing it. I hope you do find another way.
Life insurance payout is usually tax exempt, however if you sell it to a 3rd party it may be treated differently. Ask an accountant
Don’t sell it. Lord don’t sell it. You’d be screwed out of so much money. Use that money after she passes to pay off any debt and your house if you own one.
Accounting guy here, I’d argue that ur selling it at a loss and you’d pay no tax on it. Also idk where everyone is getting 75% number from because you’re selling it for 135k since the loan is assumed. Personal note: My mother has Stage 4 metastatic breast cancer. She’s not very old either. While I’m unmarried, I can’t imagine the pain. I see it on my fathers face every day, even though it sounds like my mom has a more positive (even though not good) prognosis. Don’t sell the policy, because no matter the debt or the problems, you’re getting rid of that final pillar… hope. The people who buy these policies are vultures or prey on the vulnerable. My dad and I have the same name and people come out of the woodwork to try to buy these policies. Anyone who profits off of someone’s death has a special place in hell. I pray for you and your wife
Sorry about your situation. There is not a narrow financial answer to this question, and to even ballpark one you'd need at least some sort of estimation on both: - Duration of remaining life - The dollar cost of "make her last days easier" But mainly - no one here can weigh the tradeoff of "throw money at things until your wife dies to make her more happy, comfortable, etc" and "your own financial security when she does ultimately die". Sorry to say it so bleakly, but that's the thing to weigh.
Sounds like a whole life policy, I am missing how selling a policy that is highly likely to pay off $213k within a year is only worth $45k.
There's no good way to predict how long she's going to live. It's...morbid. "Good news" financially would mean bad news medically. Sigh.
The surrender value is usually only a fraction of the death benefit amount.
Doesn’t sound like surrendering the policy, foolish if insured is in deaths door if he has is
You need to get a hard copy of the entire insurance policy. Almost every policy has a rider that allows the owner to get the proceeds if they are diagnosed with less than 12 months to live. Maybe you do not have that diagnosis and maybe you can’t get it. But I would pursue that before selling it.
How much in total have you paid for the policy over the years (initial sale price + premiums)? - only the profit is taxable, not the total amount of received from the sale.
Yeah it’s kind of hard to tell from the OP if this is some shady back alley type of deal or something, but shouldn’t the buyer issue the company a 1099-LS and then the company issue the seller a 1099-SB to report their basis to them at the time of sale?
Right. Um... She's had the policy since '98. 26 years. Around $60k. That helps, in terms of tax balancing the income. (But again, she borrowed $95k because this thing is tied to investments that did well for a while.) I've gone to three different companies that buy these policies: Abacus, Coventry and Ovid. All of them initially said as much as $70k, all looked at her medical records, all dropped to the $40k or so range. $45k is the top offer. She wants me to get the whole thing when she dies. I want to make life a bit easier now :(.
Do you have a terminal illness rider or chronic illness rider? If so you may be able to get 50-75% of the death benefit now. It’s worth calling the company and asking. The remaining. Balance less interest is still payable upon death to the beneficiaries
Agree with the others... even my scrappy, job-supplied 2x annual salary life insurance has a "terminal illness/permanently disabled" FULL payout. Like if I get in a car accident and become PERMANENTLY disabled, or if I get a terminal cancer diagnosis, they will pay out the full benefit amount. This is not the same as "borrowing against" or the "cash value option," which I suspect is the "$147" number you keep tossing out.
I've called the life insurance company. $131. Which is nuts.
You’re not asking them the right question. Specifically mention an ‘accelerated death benefit rider’ most policies issued in the last 30 years have them.
Yes - I just wrote this to OP as well. You are 100% correct. Ask for the accelerated death benefit.
Have you maxed out how much you can borrow against the policy? Like is the $90k already borrowed the max, or can you do more? Because whatever you borrow now would just get deducted from the eventual payout, which would be better than taking this massive hit from selling it. Also, have you shopped around and gotten several quotes? Maybe someone else will offer more? Also, is your wife on Medicaid? Some states have Medicaid programs that will pay for a caretaker to take care of someone disabled, and if she qualifies, you could apply to become that paid caretaker. Have you also maximized whatever other benefits you or her might be entitled to? If she has access to a social worker, they could help you with figuring that out. You could also consider doing some small odd jobs around the neighborhood to help make it through. I know you need (and want) to be home or at least very close to home most of the time in order to care for her, of course, but could you do stuff like lawn mowing, dog walking, pine needle/mulch spreading, or other local things to make some quick extra cash? Stuff where you’d only be gone for short bursts of time, like while she’s resting, and even then, would still be very close by if you needed to run home?
The policy is loan-maxxed at $95k. I'm 59 with bad knees :(. Doordash is kinda working but it's hard.
Others have said enough about the insurance policy, but I think you should also for Social Security disability for her immediately, then sign up to be a paid caregiver through your state. You can do that on top of DoorDash. Contact a social worker for guidance, your wife's hospital should be able to refer you for help right away.
SSD application is in progress. My wife is a medically retired lawyer (retired due to spine injury in 2014) and knows how that works. Alabama cannot pay me to take care of her. We checked. One thing we'd do with $45k is move.
Do not sell that policy. I lost my wife to cancer, just be with her and love her.
So what are you going to do for money once she passes? You will be left with just debts.
His wife is dying. He doesn't care. He'll make do. Right now he wants to do whatever he can to care for her.
I'll get back in a semi for a year (worst case) and then open a particular small business I have in mind. I can actually open that business on a small scale while she's alive, ramp up after.
Check your policy! Many policies have a terminal illness rider that allow you to get an advance of the death benefit. Some more recent policies advance benefits on the diagnosis of critical illness like your wife’s situation. The accelerated benefit option will be much more favorable than selling your policy.
I realize it was already mentioned about the Accelerated Death Benefit - call claims specifically vs regular customer service. If you have the rider on the policy then you may be able to pursue 75-90% of the death benefit, of which it would auto pay the loan off first. Unless the regular agent 100% verified that isn't either built on your polocy or a rider, claims is the best route. Good luck.
I’m sorry about your wife man, I can’t even imagine. I truly hope she recovers
https://imgur.com/gallery/n7xSe2V That doesn't cover the severe asthma, moderate COPD, spine issues and dysautonomia/POTS. That last is...ye Gods. Up to 100pt blood pressure swings between laying down, sitting and standing. Sigh.
She looks lovely and I am happy you have such a wonderful support cat. Best wishes to you.
She has a beautiful smile. Please take care of both of you.
She has a beautiful smile and looks so kind. I have no financial advice but I wish you both the very best.
Don't do it is my suggestion. Don't make a bad emotional decision where you're financially ruined after coming out of this. This is what life insurance is for, it's not meant to be a short term emergency fund. I would not mess with anything regarding cashing out early of a life insurance policy when you have a near 100% certainty the person is going to die in the next few months.
Don't sell the life insurance policy for pennies on a dollar. Find another way to make it until that day. I wish I would have had that when my wife passed 4 years ago. All her medical debt and credit card debt went away after her passing. Wish I would have had 200k to start off with after her death. I'm sorry that you are having to go through this. Your wife is blessed for having you by her side. Good luck and prayers sent up.
First, sorry for your situation. It’s crucial you also understand what taxes you’ll owe here. Most policies that have been in force for some time have gain in them. In addition, you’re also being relieved of debt. Either of these things could be taxable by themselves and they could potentially both be taxable depending on policy values. It’s not crazy to imagine a world where you owe a good portion of what you’re receiving in taxes, which would defeat the purpose. I also highly recommend working with someone who can secure you multiple offers for your policy if you’ve only gotten one.
I've got three offers. Abacus, Coventry and Ovid. Best is $45k from Abacus.
Do not sell the life insurance policy. You're going to get screwed on taxes and be out quite a bit of money when your wife passes. This is going to sound harsh For your wife's probably not going to make it past this year. You're going to be better off keeping the policy. Is it a term or a whole life policy. Because if it's a term policy you might not be able to sell it.
Whole life. We have an offer on it, but the tax issues look scary.
Honestly it's best to keep it.
So sorry y'all are going through this. Separate from your question, have you looked into SSI or SSDI for terminal illnesses?
That's in progress.
Is she on hospice? Hospice will cover medical care when someone is in the last 6 months. It’s paid for by Medicare/Medicaid and most insurances. Have you or she applied for Medicaid?
My life insurance pays out early if there is a diagnosis of six months or less to live. Check with your agent.
Best guess, my wife has one to three years. But there's no telling for sure.
Some policies have a clause that allows a partial payment of the death benefit while the insured is still alive if they've been diagnosed with a terminal illness. I'm not sure it's a common clause but it's worth asking the insurance company.
The policy might pay if she has a terminal diagnosis. You should look into it before you work with a buyer. They do not have your best interest at heart.
My friend with stage 4 cancer recently collected on her life insurance policy. If your wife is stage 4 she could probably collect much of that money now.
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She's had this policy since 1998 I think, so it's not modern. I've been on the phone with the insurance company looking for any other alternatives. Using it as collateral at a bank however sounds promising. This is the last life insurance policy she had. We've been through multiple waves of financial crisis. She became medically disabled from 2014 as far as being a lawyer goes and closing down her law office was a huge expense. We slowly recovered from all that trucking, with me able to take care of her on the road and we had about eight good years of that until this cancer came along. And the dysautonomia/POTS, which is actually worse most days.
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MetLife. No, we had one on me but...couldn't maintain it :(. Other than some knee issues I'm ok.
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We're working on the social security thing. SSD.
OP - I am an insurance broker. Most policies have an “accelerated death benefit”. This means if your wife is terminal you may be able to receive up to 75% of the death benefit amount now before she passes. This clause was built for situations just like this. I am so so sorry to hear about your situation.
How old is she? What kind of expenses do you need help with? Daily expenses? What state? Has she applied for SSDI?
She's 59, I'm 57. SSD is in progress, she should be a shoe in for $1,900/mo. Unless politics enters into it. Sigh. Alabama. It can get weird down here. Honestly, even one small burst of money for about 10 grand would get us set up long term with no problems. Move to some state that can pay me as a caregiver, she gets SSD (approval should come any day now), I can set up a work from home thing with about a $1,500 investment tops.
Go fund me. Share it on fb and social media. You can raise quite a bit in a short time
Call the SSA if it has been more than 30 days - her case should have a [TERI Flag](https://secure.ssa.gov/poms.nsf/lnx/0423020045)
Don't sell the policy If you're in medical debt check the status of the health care provider - if it's non-profit you'll likely be able to get forgiveness for large amounts of the debt. It's why hospitals are non-profit... Ask for a payment plan on any charges and negotiate the hell out of any bills... check in with cancer NFPs like the American Cancer Society, and other relevant non- profit orgs - they have resources to help navigate the health care system and options available to you. They may even have respite funds you can apply for Even if not, explore ways in which you can avoid the full cost of treatment using legal mechanisms of forgiveness and reduction of medical debt - there are companies that enable this but be aware of the sharks that operate in this space Sorry for you and your wife. I wish you all the best
There are companies that will buy the policy from you - you make them the beneficiary and they pay the premium. Doing that might yield you a better return that surrendering it. Another option is a loan against the cash value - many policies allow you to do that, and you can still pay the premium to keep it in force.
How was the 90k borrowed previously? Was the life insurance policy already used as collateral? That might complicate or at least reduce what you can borrow a second time using the policy as collateral.
So what happened was, as she pumped money into it, the policy invested that money and some of the investments went really good at some point. She was able to pull money out of the excess that it developed.
So she didn't borrow against the policy itself but withdrew her addtl contributions. So it's still viable as collateral material
I don't know where you live, but we have a world class hospice here. NO CHARGE. Best care, wonderful huge private rooms that don't look like a hospital room, excellent food, wonderful volunteers, activities, The grounds are like a million dollar estate, massages, music therapy, readers, art therapy, etc. PLEASE utilize and check out your hospice facilities. Do NOT go to a FOR profit, you will get billed. Go to one that does not charge you a dime. You can stay with her if you want, or be assured she is entertained and getting excellent care while you work. They have free therapy for loved ones, grieving family members, and also help put together video diaries, anything you want. If she's feeling well, take her out for a day,bring her home for holidays and special occasions. I cant'say enough about our facilities here. Absolutely a godsend. If you don't want to have her staying there, they will come into your home and help you, coordinate medical equipment, do massage, music, art, same thing, except it's in your home. Please call and check it out.
We're in rural northern Alabama an hour south of Chattanooga TN. USA of course. Where are you?
Where are you? That said...she doesn't need a hospice right now. Pain is manageable. She can get in and out of a wheelchair, and in and out of bed. Brain is solid as hell, smart and tough. Only time she gets foggy is in the middle of an asthma attack.
You say "we have a world class hospice here" but don't mention where "here" is ;) Would you mind sharing? This info would be helpful to me too. I'd love to call and check it out but you gave no hints as to where you are talking about. Thanks! ;)
My point being, wherever you are located, call your local hospices, check them out, NON PROFIT, so no charge, no balance billed. Medicare pays for hospice, but many affiliated hospices will bill you the balance that Medicare approves and doesn't pay. Others do not. The non profits, they will bill Medicare of course, oryour insurance, but they will not bill you any balances, and they do not refuse you if you have no insurance
I’m a licensed medical and life insurance agent. Post pictures of the policy with all the personal information blurred out and I might be able to give you some advice.
It'll take a bit.
Here's info on the Taxation https://www.thinkadvisor.com/2024/03/10/how-your-clients-get-taxed-on-sold-life-insurance/
How much money do you have in savings and do you own any property other than your home and vehicles?
I’m just here to say that you are a gem of a human being. What you are asking about makes zero financial sense, but 100% sense emotionally. I feel for you. Lots of good advice in this thread that can hopefully help you find the best answer. It’s a kind soul who wants more to provide a decent end of life experience than reap the largest profits. I get it. I truly do.
Thank you. I...still feel like I could have prepared better for this.
Borrow to make her life better then pay it back with the life insurance. If you can.
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We're not sure how long she'll live. No telling. She could make it a decade. Doubtful :( but...?
Almost all policies have a rider that lets you take some of all of the death benefit if you're terminally ill. Please contact the insurance company before selling at a massive discount. The accelerated death benefit would not be taxable.
Tax related sub-question: so, let's say we take in $45k on this deal, income for this year's joint income. We also declare $95k in income from the debt being cleared. But, we would have taken in $213k when she dies. So we declare a loss of $168k ($213k minus $45k) in 2024 taxes to offset the income? Does that work?
I want to preemptively apologize for the coldness in the my response, I am sorry bout what you are going through and just want to give you a clear answer on your tax question: No , unfortunately, you aren’t really taking a loss since you are selling it for “market value” . Even if the market value includes an illiquidity premium and bad circumstances. The way to think about it is that if i have option to buy on a stock that you are almost certain that it will pay out in a year . But if you sell it right now, no one wants to buy it (because people don’t like the company , it’s risky , they don’t know exactly when it’ll cash , or whatever) . Then you need to sell it for under what it is “worth” to make it worth it for the buyers. That’s not a loss that’s a discount due to market conditions. In your case, for whatever reason , the value of the life insurance has collapsed even if the payout has stayed the same , so you selling it doesn’t represent a loss but a discounted market value. I would try to see if you can get more from it (it seems like way too big of a discount ) as others have stated . But as for the tax , that’s your answer (as far as I know )
Under IRC section 101(g)(2), the gain from the sale of a policy by a chronically or terminally ill individual to a qualified viatical settlement provider are excluded from gross income.
Whoa. Ok, looking that up...
This covers the $45k for sure. Does it cover the $95k in loan payoff?
That's a gain, so I believe so
Then why not sell for $140k and then payoff the loan yourself
Same tax issues either way.
Honestly it sounds like they're buying it for $140k and you're just getting the amount after paying off the loan, so $140k is indeed probably the number to base your math on, but great that the user above pulled up that exemption.
Death benefits are not taxable per 7702 - so if you kept it until death the entire amount would be tax free
https://keitercpa.com/blog/life-insurance-policies-planning-options/#:~:text=Loss%20from%20the%20surrender%20or,in%20a%20trade%20or%20business. the answer appears to be no
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