Stung by the market, advisers are abandoning variable life for more stable universal life products.
Life insurance, in
its many different forms, is a fundamental estate planning tool. A
well-structured life insurance policy, properly owned, can be used to solve a
variety of knotty estate planning problems from equalizing an estate to funding
buy-sell agreements among business partners.
Nearly everyone is
familiar with the most basic (and most popular) form of life insurance, known
as term life. But there are many “flavors” of life insurance. Two of the more
“sexy” varieties recently have fallen out of favor – variable universal life
and variable life. These policies carry an inherent equity risk, because their
cash value is invested in subaccounts similar to mutual funds. The stock
market’s recent poor performance has eaten up the cash value in many of these
variable policies, and forced policy holders to add more premium dollars.
If you have a
variable life insurance policy, you may want to read more about them in a
recent article in Investment News (A Flight to
According to this
article, many financial and insurance professionals are now recommending universal
life, with its guaranteed rate of return. In fact, when InvestmentNews polled
484 advisors, they found that 25 percent said they are now recommending
universal life to their clients … however, fully 50 percent said term life
insurance is among their most-recommended products.
Whichever “flavor” of
life insurance you purchase, understand that life insurance proceeds are not
automatically estate-tax free, nor are they free from the Nursing Home and Medicaid Look Back. Life insurance must be structured, owned and
properly distributed in order to accomplish your estate planning and asset protection goals.