Still alive. Did I get taken to the cleaners by my life insurance? – Houston Chronicle
Q. After waiting almost 10 months, my husband and I finally received our 2020 refund from the IRS on January 10, 2022. The total amount was $257.66 over the refund amount we requested. We assume the refund check included interest. Will we get an interest statement from the IRS for our 2022 tax filing? The check itself came without an explanation letter so we do not know how much of the check was for the actual refund and how much was for the interest.
A. The IRS will send you a Form 1099-INT showing exactly how much interest you earned. Presumably the form will reflect the amount you mentioned. This interest is taxable as income and must be reported on the appropriate income tax return.
Q. I bought a term life insurance policy in 1977. Back then, the benefit was $75,000, and the yearly premium was about $800. Now, the premium has increased to $1,014 today (I am 78 years old now), and the benefit has dropped to $35,000. What is your opinion regarding whether this is a common practice that covers all life insurance policies, or alternatively whether I have been taken to the cleaners by selecting this company to purchase my life insurance?
A. The policy would have been a great investment had it paid off back in the 70s or 80s. You, however, failed to do your part in bringing about that result.
Had you been able to predict the future 45 years ago, it clearly would have been much better to invest all those annual premiums in the stock market. But that’s the whole point of life insurance. You don’t know for sure when the insurance will pay off.
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Answers to your legal questions
The life insurance does seem to be very expensive. Ten or 20 years ago, you might have been able to find a policy which provided far more death benefits for the same annual premium. Of course, even if you had bought better life insurance, it wouldn’t have changed anything. You are still alive after all.
At this point, the cost of the life insurance does seem excessive, assuming you are in good health. You might also have done a good job saving for retirement, and thus, there may be no need for the $35,000 death benefit.
Replacing the policy with a cheaper one might still be an option, assuming you are healthy and a non-smoker, so you might want to look into a new policy if you need the death benefit to be paid.
You should consider talking to your accountant or a financial planner to see whether you should cancel, or possibly replace, the insurance.
The information in this column is intended to provide a general understanding of the law, not legal advice. Readers with legal problems, including those whose questions are addressed here, should consult attorneys for advice on their particular circumstances. Ronald Lipman of the Houston law firm Lipman & Associates is board-certified in estate planning and probate law by the Texas Board of Legal Specialization. Email questions to stateyourcase@lipmanpc.com.
