(Retirees or post-age 70)
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Guidelines |
Routine Requirements |
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Half of net worth or three to five times earned income. For instances where federal exemptions eliminate estate tax liability, the following formula may be used: Total line= [earned income plus retirement Social Security] x 5, plus 15% to 20% of net worth. |
Always needed: Gross annual earned income on the application. Always needed: details of all existing life coverage and whether it is individual or group coverage Third party financials from a CPA will be required for applications of $2 million or greater. Examples are a current income statement and balance sheet. |
At the older ages, the value of the gross estate will generally be the dominant factor in determining an acceptable total line. Half of net worth or three to five times earned income is used depending on age and medical history.
Life insurance applied for by children on dependent elderly parents will not be accepted. When an elderly parent is financially dependent, even small amounts of coverage present justification problems, since the burden of the financial dependence terminates upon death. For elderly parents not dependent, there must be insurable interest to consider the application. If insurable interest is documented the parent/parents must apply as owner(s).
The three-year contemplation of death rule requires the estate of an insured-owner that transfers existing life insurance within three years of the decedent’s date of death to include the insurance proceeds as part of the taxable estate.