Whole Life Insurance For Estate Planning - The White Coat Investor - Basics

Should I buy whole life insurance for estate planning? Probably not. This is a sales technique used by whole life salesmen to vaguely refer to some estate planning benefits of whole life insurance.
While a whole life policy placed inside an irrevocable trust can help reduce the size of your estate (and associated estate taxes) and life insurance proceeds can help provide liquidity in the event you need some time to liquidate a farm or valuable business, the truth is that the vast majority of doctors will not owe estate taxes nor have a significant liquidity need at death.
Current federal estate tax exemption limits are $11.4M ($22.8M married) and that figure is indexed to inflation. Most doctors simply don't make enough or save enough to have an estate tax problem.
Most states don't have an estate tax, but a few not only have a tax, but have a much lower exemption limit than the federal limit. These include CT, DC, RI, NJ, IL, MA, MN, NY, OR, VT, or WA.
The White Coat Investor has been helping doctors with their money since 2011. Our free financial planning resource covers a variety of topics from doctor mortgage loans and refinancing medical school loans to physician disability insurance and malpractice insurance. Learn about loan refinancing or consolidation, explore new investment strategies, and discover loan programs for specifically aimed at helping doctors. If you're a high-income professional and ready to get a "fair shake" on Wall Street, The White Coat Investor channel is for you!
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00:00 Whole Life Insurance For Estate Planning
00:20 The Truth About Estate Taxes

[@mattengland653]

This is a ridiculous “analysis”.. dividend paying life insurance set up properly can yes, solve the estate tax issue for those who need it - I know plenty MDs who will need it. In the event the death benefit is not needed, the cash value can bolster spending from investments to a level well beyond what you could without it. Due to its very distinct and singular, characteristics. Such as tax free income, capital gains tax free, and if set up with indirect recognition, the ability to restore value and eliminate opportunity cost when using the cash value. To do a 4 minute video and be unequivocally negative about something that is very complex and ultimately a multi-faceted asset class is reckless and dangerous.. stick to treating patients doc! If you want to be in finance get licensed and regulated so you can be properly held accountable when you offer shit advice.

[@thewhitecoatinvestor]

Guessing that you sell whole life policies.

[@mattengland653]

I am a licensed and registered financial planner (RICP) retirement income and estate planning specifically, since 2013… as a planner, I am product/instrument agnostic - the goal for estate and retirement planning is to achieve the most efficient income streams, liquidity and legacy goals possible. While also accounting for the particular taste of the client.
That being said, there are empirical facts within financial planning regarding the legitimacy of actuarial products like cash value life insurance, annuities etc.
The financial services niche of retirement income and estate planning remains an anomaly because the advice given to individuals and households continues to vary so wildly, despite the fact of the empirical evidence that integrated strategies combining investments and actuarial/insurance based products irrefutably provide the most stable, predictable and most efficient outcomes. There are numerous academic, peer reviewed white paper studies on this subject and yet, the public perception does not align with the research. Largely due to so many talking heads, who are not even licensed or registered, coming out and saying X & Y are bad in all cases and Z is a blanket approach that works for everyone…
My response to your attack on whole life insurance is due to the fact that, you are effectively saying do not even consider this tool… there are myriad applications for the right kind of cash value life insurance…
Cash value life insurance - dividend paying issued by a top 4 mutual carrier to be specific - can provide a temporary spending resource in down markets to prevent selling your investment assets at a loss. This year is a great example - because the cash value is non-correlated to the market it can never lose value - by taking a distribution from the life insurance as income vs. the portfolio - you avoid killing off interest earning dollars in a down market - and can allow the portfolio to recover or even grow before resuming distributions. The characteristics of the cash value policy make it the premier asset buffer over cash or bonds because it grows positive every year, is income tax and capital gains tax free and if set up correct with indirect recognition it eliminates opportunity cost completely. There is no other vehicle that allows for the elimination of opportunity cost.. PERIOD.
To my point of being product agnostic - another great asset buffer to protect investments in down markets is duh duh duh a HECM (reverse mortgage).. these are now US government backed and guaranteed securities that always grow positive (when using the line of credit option) they cannot be cancelled like the HELOCs in the housing crisis… the income is tax free and once opened at age 62 - the client can allow the bucket to grow at a guaranteed interest rate and take a distribution only if they want or need to - subsidize income whIle delaying social security - buffering down markets - providing liquidity for unknown medical/long term care/spending shocks and on and on. By implementing either of these strategies, a household can effectively do 2 things:
Spend at a much higher withdrawal rate from investments because there is now a non-correlated buffer in place
Spend down effectively all of the investments without worry of legacy because of the death benefit and if there is a HECM all that is owed within 9 months of death is what was used + interest which we would cover with the death benefit of the life policy.
Lastly, the benefit of annuities and the leveraging of risk pooling through a large mutual company - simply cannot be replicated by the household - the individuals who die younger will subsidize those who live longer - and this key characteristic cannot be replicated.
I could go on and on - in fact, if you’re so positive that these products are useless I’d be glad for you to share your own financial plan with me, and at no cost I can guarantee that if you let me show you how to implement these tools ALONGSIDE YOUR INVESTMENTS, you will not be able to come up with a more efficient solution.
I’d love to have a friendly debate/challenge with you on these topics!
Email me:
[e-mail]

[@mattengland653]

@@thewhitecoatinvestor whenever you’re ready!