Life insurance with siblings as beneficiary

[connie333]

What is the name of your state (only U.S. law)? Pennsylvania

I am thinking about buying a life insurance policy for myself. I am 56. I have no children. I would like to do this so that my siblings will have some money when I am gone for their future. Two of them lost career manufacturing jobs and will not have much in retirement---they are 54 and 51.

Will they have to pay any type of estate or inheritance tax on the money left them from this life insurance policy?
Thanks,
GerriWhat is the name of your state (only U.S. law)?

 

[anteater]

If you are the owner of the policy, then the proceeds are included in what is called your gross estate. That is the amount that the federal estate tax is based upon. However, for federal purposes, the first $3.5M of the gross estate is exempt from federal estate tax right now. That may, and probably will, change. As recently as 6 years ago, that amount was only $675,000. My guess is that it will remain at $3.5M, but your guess is as good as mine.

Life insurance proceeds are exempt from the PA Inheritance Tax.

However, if you are hoping to dodge the PA Inheritance Tax:

1) Life insurance is going to be pretty expensive at age 56. You need to look at the trade-off between that expense and the possible inheritance tax that would be due from simply passing your assets to siblings.

2) Unless you have reason to believe otherwise, you still have a ways to go in this life. Judging from what you said in your other posts, you do not have an enormous nest egg. While it is wonderful that you want to help your siblings, you probably need to think of your own potential needs first. The expense of obtaining a life insurance policy now could be a real drag.

3) As in #2, since your life expectancy is roughly 30 years, nobody can say whether there will even be a PA Inheritance Tax when you pass away.

 

[connie333]

Thank you again. The reason I am looking out for my siblings is because we just lost our big brother, who was only 59, to non-hodgkins lymphoma. He was NEVER sick a day in his life and then 18 months ago he was struck with this disease. What hell we went through these many months---especially the last three weeks of his life in a coma, on life support and kidney dialysis. My poor brother worked hard and saved and saved toward his retirement during his 33 years as an Elementary School teacher and now he's gone. I want to make sure that my brothers and sisters have something left should I leave this life early, too. We NEVER would have believed that our precious big brother would pass at such a young age...we are devastated.

 

[DeniseM]

Yes. The fact that a life insurance is important is undeniable. Even as a 56-year old, it is never too late to think of getting one, especially when you have dependents that will benefit from it after you pass away. The next question that arises is where you should buy your policy. Most local agents are affiliated to some insurance companies and could result in a biased opinion and unnecessary hard sell of certain products. Nowadays, the best option to look for life insurance would be online. There are a number of insurance service providers can provide you with a staggering choice of different policies for different requirement. There are however a few things to look out for when choosing such providers. Always choose a website that is accredited by Better Business Bureau. Your website should also be able to provide you with the current ratings of all the insurance companies on its records. A reputed life insurance company should have a rating an A or higher, evaluated by A.M, Best or any other known ranking agency.

If your health is poor or you qualify as a specialized case (you have a high risk job, are a smoker, etc.), there are website that deal effectively in such situations. There are well versed with the underwriting process involved in qualifying for an insurance policy and can help you locate the insurance company to suit your needs.

D

 

[Dandy Don]

You will be very lucky if any insurance company lets you take out a policy at all. You have no insurable interest for them (you are not providing financial support for dependents such as a spouse or children). Don't be foolish enough to pay the monthly premium to a company and then have them deny the payout after you die. You would be better off putting any money that you would pay for a monthly premium into a savings account or money market account to leave to your heirs.