Living and Learning

    Two Financial Case Studies

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    The only thing that is certain in life is change, so having flexible financial plans and products matters.
    Let’s look at two examples of how unsuspecting needs arose and how a greatly misunderstood financial product came to the rescue.

    A 34-year-old married man insured his life with a participating whole life contract. He also funded a retirement plan through his employer for many years. Later, he had children and left the company to pursue business on his own. In his late forties, he was diagnosed with a lingering, terminal disease. He attempted to continue working as normal, but was unable to keep pace with the demands of the very physical labor. He had always worked hard, so it was emotionally and physically difficult for him to accept the fact that he had to stop working. Because he continued to try to work a few hours here and there, his disability benefits would not begin. His income reduced greatly, causing the family to get behind in many bills over time. He called me not knowing what to do, and to his surprise, the out-of-sight, out-of-mind cash value of his whole life insurance policy, which had been building up for years, sprang into action. Some of the cash value* was used to get his mortgage payments up to date and some to pay his policy premiums in advance for six months. We discussed how hard it would be for him to not work, and I assured him that he had prepared well, so his advance planning would benefit him and his family. I also explained the waiting periods on Social Security disability, as well as his disability contract, and how waiver of premium would work with his whole life policy. When the appropriate time had passed, he applied for Social Security disability, his own disability policy, and
    his waiver of premium benefit on all of his life insurance contracts. Meanwhile, his health continued to deteriorate. He had a living benefit rider (taxable benefits when exercised) on his life insurance policies, which allowed him to use some of his life insurance benefits while he was alive. Eventually, he also applied some of the funds for at-home health care during the last few months of his life. This man died knowing that the life insurance purchases that he had made over the years would continue to provide financial care for his family. He took comfort, too, in knowing a financial advisor he trusted would be there to ease the process for his loved ones.

    Another example occurred during the 2008 economic downturn. Many of my clients had kids in college with contributory 529 plans in place, which often are invested in the stock market. With the financial downturn taking money from these accounts, this was not the best recommendation. However, tuition was still due. For many of my clients who had diversified their holdings with whole life insurance, it was an option to temporarily use the cash value* from the contracts to pay for tuition. This instant liquidity and accessibility were pleasant surprises for those clients who were already greatly concerned about what the future would look like. Once the market recovered, the 529 plans were used to pay the cash value back into the whole life contracts.

    Having a crystal ball would make financial planning so much easier. However since we don’t have that luxury, being open to plans that involve products with flexibility can greatly impact outcomes when life happens – and oh, how it does!

    * You can access the cash value in your policy, generally tax free, via partial surrenders and policy loans. Policy loans and surrenders reduce the policy’s cash value and death benefit. Loans also accrue interest.

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    Angie Shay
    Angie Z. Shay has worked in the financial services industry for more than 22 years. She is president of THE PATH Financial Strategies, LLC. Angie Shay is a financial adviser with Eagle Strategies LLC, a Registered Investment Adviser and an indirect wholly owned subsidiary of New York Life Insurance Company. THE PATH Financial Strategies, LLC is not owned or operated by Eagle Strategies or its affiliates. Neither THE PATH Financial Strategies, LLC or Angie Z. Shay provide tax or legal advice.