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In Reply to: insights wanted posted by natalie on December 11, 2003 at 14:38:09:
: I just discovered this board today and am impressed by all of the collective wisdom. I am interested in your views on a specific situation: in early 2001 an 87 year old man went to a financial planning seminar. He then entered into a financial planning agreement. Part of the financial plan recommended an Irrevocable Life Insurance Trust. A single premium life insurance policy was purchased with a premium of $330,000. The policy was guaranteed for 5 years with a death benefit of $396,000. At the time, his net worth was just over $1 million, including the value of his home and the value of existing life insurance policies. Now he does not have adequate funds to live comfortably. The financial planners, who also recommended and sold the policy, continue to believe that they provided him a good financial plan and that the policy is a good decision. Thoughts?
Thank you for the insights. To answer some questions: The trust was set up first. The financial advisors referred the client to an estate planning attorney who did the trust. The attorney also did the will, living trust, etc. and charged about $7,000 for the service. The insurance policy - as I understand it - was the only one available given the client's age and health. (It was rated - is that the right word?) He also had to pay $16,000 in capital gains taxes to fund the trust. The beneficiaries are his children - so that is good - but the risk is that the death benefit will not be there as it is only guaranteed for five years. The commission on the sale was quite large - approximately $56,000. Any easy way out of this?