I thought it worth pointing out that it was a separate CFP that gave her that idea, not the agent. The agent essentially declined to provide the inforce illustration as not worth his time or something like that. I'm a bit skeptical that it will work out but it is certainly worth a look.The concept would be as your agent said - to (a) reduce the face amount of the policy pretty dramatically, from its current $500k level to probably well less than $100k, (b) stop paying premiums into the policy, and (c) hold onto the policy until the surrender charge wears off, which you said in your original post happens in six years....
....In order to see exactly what will happen, you'll need to get an inforce illustration from the company. You can either get one directly from the company, or work through the agent. The agent wanted to reduce the face amount just enough to avoid the policy becoming a "modified endowment contract" (MEC), which usually brings about bad tax consequences when cash value is withdrawn. You can follow the agent's thought process as a safe harbor.
But I'm confused about one thing, the relationship between an IUL and 'MEC'. As I understand it an IUL can never truly be "paid up" and thus can't really be overfunded, so I don't see how it can be deemed a MEC or why reducing the face value would help--I'd think it would be just the opposite. Where am I going wrong?
Statistics: Posted by bd7 — Sat Sep 06, 2025 10:57 am — Replies 25 — Views 2328