modified:  September 26, 2019  (originally created in fall of 2016 (see timeline below))

2019/9: REMINDER: MOM IS SENSITIVE TO THE FACT THERE IS A LIFE INSURANCE POLICY ON HER.
            PLEASE DO NOT DISCUSS THIS WITH HER.  Thanks

In order to update this analysis for 2019 November decision on our 2020 contribution, I got three updated illustrations, scenarios, (the same three we got two years ago) from Lincoln. In September I requested the respective premiums required in the later years to keep policy from lapsing in the “As Is” and “$0 premium” options.  (Let me know if you would like copies of the illustrations I got from Lincoln). See Graphs on how the numbers play out. As much of the information remains the same and for continuity to the 2017 analysis, I have made additional notes below to reflect 2020 decision making.

(Section 1) Facts about 1989 Keyser Family Trust

  1. Early 1990 mom created 1989 Keyser Family Trust
  2. Mother is the Grantor. Ann is the trustee. We, five siblings, are the beneficiaries
  3. The only asset in the trust is the Lincoln National life insurance policy on mom.
    Trust does have a small bank account. (2017/8/8)
  4. Trust is irrevocable (Article 1)
  5. Trustee order is Ann, then Edward then Carolyn (Article 10)
  6. Beneficiaries may not sell, pledge... any interest in trust (Article 13)
  7. Each beneficiary is given and notified of their right to withdraw their portion of a contribution.
    (This is called “Crummey Withdrawal Right” and insures that the contribution qualifies as a gift under  IRS guidelines)

(Section 2) Facts about Policy at Lincoln National [LN]:

  1. Universal life policy is owned by 1989 Keyser Family Trust
  2. Insured: Gene Keyser Jones
  3. “The policy will continue in force for the lifetime of the insured...” (correspondence 2017/4/20)
  4. Death Benefit: $420,000
  5. Policy went into effect in October 2007 (the last in a series of life insurance policies)
  6. For the last 10 years mom has made a voluntary premium payment of $5,800/yr usually in October
  7. 2016/10/24 cash surrender value: $35,503 (policy statement) 2019/9 CSV is $0
  8. 2016/10/24 Policy value: $47,657 2019/9 Policy value is $0
  9. Lincoln National forecasts policy value will pay premium until August 2028 (2019/9 December 2028) with $5,800 contribution or until July 2025 with no further contributions
  10. Premium is deducted monthly. In 2016/10 the deduction was $1,562. (summary of policy activity)
    It appears to increase by about $6 per month.
  11. 2016/1/14 We may elect a guaranteed premium amount of $14,000 (2019/9 $17,136) payable to age 121
    (at which time no other premium is required.  as per phone call with LN representative)
  12. (A) 2017/7/11 According to new illustrations 2017-7-10, (another set of illustrations 2019/8)
    if we do nothing, no further $5,800 payments, the policy will lapse in 8 more years, age 98 (2019/9: 6.5 years, age 99).
    If we continue to pay the $5,800 / year then the policy will lapse 3 years later, in 11 years, (2019/9: 2 years later in 8.92 years), age 101. (Same information expressed differently in #9 above) (2017/7/14)
    (B) 2017/8/8 The cash value is currently about $20,000 (2019/9 $0). The monthly premiums are about $18,000 / yr. We asked the LN rep. on the phone today, “How can the policy last 8 more years when it looks like the money runs out next year?”. Nathan said, “That’s the way the guarantee provisions for this policy work.”

(Section 3) Timeline:

  1. 2016/11/17  John called Edward regarding analysis they (Gene and John) were doing on LN. He then emailed Edward copies of  information they had received from new insurance agent regarding this LN life Insurance Policy.
  2. 2016/12/3 Talked with mom about policy. She believed surrendering the policy was best alternative.
  3. 2016/12/5 Sent email to mom and John. (Click here to see text of email) (2019/9 my feelings and thought are same now)
  4. 2016/12/12 Phone call with Mom and Ann regarding LN
  5. 2016/12/15 Carolyn was in Midland for mom’s cataract surgery and mom initiated conversation about  LN.
  6. 2017/1/4 Ann and I called LN to clarify our understanding about policy
  7. 2017/2/13 Mom initiated conversation with Ann so the three of us talked on the phone about LN
  8. 2017/early March: Carolyn and Carl were in Midland visiting and mom initiated discussion about LN with them
  9. 2017/3/26 Carolyn and Carl Skyped with mom and John about LN as follow-up to Midland discussion
  10. 2017/4/30 Mom initiated conversation with Laura about LN  (2017/7/6)
  11. 2017/5/9 Email with links to these pages to all the siblings / beneficiaries
  12. 2017/7/2 Beneficiaries meeting. Lots of good discussion and vote (4-1) to table any decisions while we
    continue to gather information; specifically: locked-in premium(see 2-11)
     and life settlement vs. surrender   (2017/7/6, 7/11)
  13. 2017/9/30 Partners and beneficiaries meeting. Unanimously agree to make $5,800 payment this year.
  14. 2018/9/25 Partners and beneficiaries meeting. Unanimously agree to make $5,800 payment this year. “A reminder: Mom is sensitive to having a life insurance policy. Out or respect for mother, it might be wise Not to mention it to her.”
  15. 2019/9 Got updated (as of July 24, 2019) illustrations from LN and called to get other numbers. Reviewed and reached consensus with Ann on course of action.