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Hi -
Hopefully someone can help me out. I know _nothing_ about life insurance, but I am Dad's POA and now have to deal with his life insurance policies.

Dad is in nursing home. He is 90, had a stroke last March and is now disabled.
His income is from Pension, SS and VA benefit.
He has 3 policies with Commonwealth Annuity and Life.
Also has another Policy with Lincoln.

The three policies with Commonwealth have loans on them. He has been getting loan interest due notices for years that he does not pay. The interest amounts have been capitalized into his loans. I don't have all the information, but I believe the interest rates on all 3 loans is 5%. The premiums are being paid auto-magically on a monthly basis.


Loan 1 $4,539.81 (ordinary life policy)
Loan 2 $5,328.24 (low rate life policy)
Loan 3 $6,956.61 (low rate life policy)

I'm trying to decide if it is cost effective to 1: start making payments on the loans, or 2: to pay just the yearly interest due, or to 3: not pay anything on them other than the premiums.(which is what Dad had been doing.) Maybe snowball them?

I'm in the process of changing the beneficiary over to my mother. (previously was my oldest brother who is now deceased.) We are planning on putting the family house up for sale starting in the spring, and still owe an equity loan on the house. (possibly rent to owning house? something else I need to research)(mom, 84, currently in an apartment, family home is in need of repairs.)

Dad does not currently have a burial plan. I think the plan was to use the insurance payout to bury him; when the time comes.

Can anyone make any suggestions?

I would really like to make the best financial decision on this one.

Lady Ianna
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LadyIanna: "The three policies with Commonwealth have loans on them. He has been getting loan interest due notices for years that he does not pay. The interest amounts have been capitalized into his loans. I don't have all the information, but I believe the interest rates on all 3 loans is 5%. The premiums are being paid auto-magically on a monthly basis.


Loan 1 $4,539.81 (ordinary life policy)
Loan 2 $5,328.24 (low rate life policy)
Loan 3 $6,956.61 (low rate life policy)"



How much net insurance does he have, i.e., poliy amounts minus the loan balances?

"I'm trying to decide if it is cost effective to 1: start making payments on the loans, or 2: to pay just the yearly interest due, or to 3: not pay anything on them other than the premiums.(which is what Dad had been doing.) Maybe snowball them?"

Does your father have the assets to easily pay these loans?

"I'm in the process of changing the beneficiary over to my mother. (previously was my oldest brother who is now deceased.) We are planning on putting the family house up for sale starting in the spring, and still owe an equity loan on the house. (possibly rent to owning house? something else I need to research)(mom, 84, currently in an apartment, family home is in need of repairs.)"

Assets to perform the repairs?

"Dad does not currently have a burial plan. I think the plan was to use the insurance payout to bury him; when the time comes."

The insurance pay-out will belong to the named beneficiary. Will he or she use the pay-out to cover funeral costs? And will the proceeds be available before the bills are due? Also, is the sum of the net pay-outs greater than the expected funeral costs?

Last, you mention an equity loan, and do not recite whether there are any other loans. 5% is relatively inexpensive cost of funds and I would likely concentrate on paying any higher interest rate loans before the insurance loans.

Regards, JAFO
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Lady Ianna,
the cash value of the life insurance policies, is an asset in the estate. The cash value should be used to pay for nursing care. If your father passes away before it is spent the remaining death benifits goes to Beneficiaries.

There are three ways to remove money from the policy. Two ways are tax free.
1. The basis of the policy, which is the money paid in premiums, can be withdrawn tax free.
2. You can get loans secured by the cash value which are tax free. Insurance companies expect you to borrow money on the policy under your father's situation. It is like a construction loan. Your need $240,000 for nursing care plus a 5% interest reserve for 24 months.
3. The third way to get fumds is a taxable withdrawal. That makes sense if the health care deductible exceeds the interest expense.

Do not pay of the loans. There is no benefit to the beneficiaries. Your father provided for the family and now you use the insurance to pay for long term care.

Call a fee based advisor who will for $500 advise you.
Redondo Beach Mike
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RedondoBeachMike:

"the cash value of the life insurance policies, is an asset in the estate."

Will you clarify?

The cash value belongs to the Owner of the policy, which need not by the insured.

Assuming that the insured owns the policy, then the cash value belongs to him/her while alive.

The estate is created once the insured dies (in the normal definition of estate). The cash value does not belong to the estate.

Regards, JAFO
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Here's what I information I have on the value of the policies:

Base Policy 1 (as of 7/9/18)
Face Amount $5000
Basic Cash Value $4336
Total Loan $4539.81
current NGE accumulate $132.90
Accumulated at Interest: $132.90
Interest earned $118.80
Total accumulated at interest $4211.84
Loan interest due on this date $216.18 (not paid)

Base Policy 2 (as of 7/9/18)
Face amount $5000
Basic Cash Value $4394.15
Total Loan $5328.24
Current NGE accumulate $157.05
Accumulated at interest $157.05
Interest earned $134.90
Total Accumulated at Interest $4788.57
Loan interest due on this date $253.73 (not paid)

Base Policy 3 (as of 8/23/18
Face Amount $5559.00
Basic Cash Value $4894.36
Total Loan $6956.61
Current NGE Accumulate $173.77
Accumulated at Interest $173.77
Interest earned $146.49
Total Accumulated at Interest $5203.18
Loan interest due on this date $331.27 (not paid)
I also have a net cash surrender value of $2849.37 listed for this loan (as of 7/19/18)
Issue date 8/23/1956 maturity date 8/23/2028
This is the one I have paperwork showing the 5% interest rate.

I have no clue what any of this means. Tried adding and subtracting six ways to Sunday and can't figure out how they get any of these figures.

As I said, I know _nothing_ about life insurance.

Currently, dad's nursing home bills are being covered by his VA benefit and his medicaid. His pension, SS and any excess VA benefit is paying for my mothers expenses and the home expenses. Somehow we seem to be coming out ahead. Don't ask me why. I keep waiting for the other shoe to drop. :P

The equity loan has recently gone from 4% to 6.30%. So that should be the priority till the house is sold. (hopefully for more than we owe on the equity loan) approx $50,000. The trick is going to be selling the house for more than what we owe, without spending a fortune for repairs.

There are other debts. Some are limited time 0%. It's going to be a big balancing act for a while. Which is why I'm trying to gain as much information as possible.

Lady Ianna
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JAFO,
Technically, you are correct. It is Dad's asset. However, since this is a long term happily married couple, the reality is that professionals would view this as a married couple estate with all asset going to the wife tax free at the husband's death. Estate planning assumes the wife gets the asset so it actually is part of the couples estate. The will and the trusts have a chain of beneficiaries who don't own the life insurance but will benefit from it.

So, I say our estate plan includes $950,000 of death benefits and eventually more than $1,000,000 in CSV when we reach our nursing home age. Technically, the wife owns all of half and we share the rest.

If you own a small business valued at $30 million and have a life insurance policy of $5 million to cover estate taxes then the business and the life insurance are assets of your estate, a trust or community property, etc. It is all generically called family estate planning.


Divorce blows up the entire estate plan and then the assets must be segregated.
Redondo Beach Mike
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well the other shoe has dropped. Just recieved a re-determination in the mail from Medicaid. They are retroactively charging us for nursing home care to the tune of 10k. Due Feb 1. Then going forward they are charging more per month than the VA pension amount. What medicaid is covering I really don't know. I'm not sure we will be able to make all the monthly payments now.

Still calculating through the sticker shock.

I need a really good lawyer to sort all this out, because somehow I think we're getting ..

Lady I.
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Are you sure you are talking about Medicaid and not Medicare?
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Yes I am talking about medicaid.

Medicare denied a bunch of claims previously; (so we had to send them to Medicaid) Stating that they were medically un-nessasary. (sp?) How they can be unnessesary is beyond me when dad is paralyzed on on his left side is beyond me.


sorry about the run on sentences and horrible grammar. my brain has gone to mush.

Lady Ianna
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