You may think that life insurance and grandchildren is a strange topic but let me explain. I’m at the point in my life where my children are raised and married, and I have accrued some money. How do I get money from myself to Generation 2 or Generation 3 in an efficient manner and at a maximum potential, factoring in obstacles such as probate, taxation, maximizing the money I have to invest and/or pass on?
Have you ever thought about this option? If I take a chunk and drop it into a life insurance policy, the younger my grandchildren are when I do this, the better. Then when my demise happens, they get more return on the investment immediately, without tax and without probate. If this happens and they’re still young, it goes into a trust for them. If they’re young adults and you want them to be able to use this at their own discretion, we structure the beneficiary per your wishers. If life changes, you are the owner of the contract and you can change the beneficiary status as needed. If you find it necessary to cash this, that is always an option as well.
I found a blog on this subject for your reading. Call me, quoting is free, and you may look at this from a different perspective.
Life insurance: A gift fit for a grandchild
By Tyson Dailey
Life insurance can be an appropriate and thoughtful gift for a child.
When you think about all the things you want to purchase for your grandchild, life insurance would likely be near the bottom of the list. While it may not be the most exotic purchase, by the end of this blog I hope life insurance would be up for consideration. Life Insurance for a child or grandchild offers three important advantages: it’s inexpensive; it provides protection for the unexpected; and certain types of life insurance could help protect your child’s or grandchild’s insurability.
First, life insurance is inexpensive. The way life insurance works is that the younger and healthier you are, the less the coverage will cost. Life insurance premiums are based on life expectancies and risk factors. Risk factors would include things that could adversely affect life expectancy, for example, health issues; habits like smoking or sky diving; and family history.
Let’s compare an 18-year-old nonsmoker with a 40-year-old smoker with high blood pressure and heart issues. The life insurance company would see the 18-year-old as a better risk based on age and the other risk factors (smoking and health), so the same coverage would cost less for the 18-year-old.
Second, life insurance’s main purpose is to provide a tax-free death benefit. I know it’s not a pleasant thought, so we will not dwell on it too much, but answer this question: Would it be better to have a tax-free benefit or use credit cards or a loan to pay for final expenses?
Finally, depending on the product purchased, you could protect your child’s or grandchild’s insurability.
As a parent or grandparent, you have a couple of options available for your child or grandchild’s insurability. First is term life insurance, which would provide coverage for a fixed number of years. A term policy could be converted later for up to the original face amount to a permanent form of life insurance without proof of insurability.
The other option would be a permanent life policy, which would be more expensive; however, it could offer a major advantage. Permanent forms of insurance can offer an insurability rider that allows purchasing additional coverage, without the proof of insurability. This protects your child or grandchild in case they develop a medical condition, making coverage more expensive or unavailable down the road. Just as insurance is more expensive as you age, some medical conditions make life insurance unobtainable.
Regardless of the type of coverage you select, purchasing life insurance for a child or grandchild is not a bad idea. The type, coverage amount and contract structure would vary based on each individual situation, and your agent can help you evaluate your options.