My grandma took out a life insurance policy on my grandpa 20 years ago, but now she can’t afford the payments anymore. She mentioned stopping the payments, but I told her that would be a waste of money. I’m wondering if I can be added to the policy to take over the payments.
Is it common for someone to be added to a life insurance policy like this? I want to make sure my grandparents are financially protected, and we’ve agreed on how the money would be split. Any insights would be really helpful.
Transfer the policy ownership to yourself. Then, you can list yourself and your grandmother as beneficiaries, dividing it however you want. You’d have complete control of the policy and be responsible for the payments. Any cash value would also be yours.
Keep the policy under your grandmother’s name since she’s been paying the premiums and should have the cash value. This way, she remains in control, avoiding any appearance of impropriety on your part.
Check if the cash value is enough to cover the premiums, so the policy might pay for itself until your grandfather passes. Ask the insurance company when the policy would lapse if payments stop.
As for beneficiaries, you can split it based on the payments you make. She can either assign you a percentage as a primary beneficiary or make you 100% contingent beneficiary. If she passes before your grandfather, you would receive the full death benefit.
I’m not certain since the OP didn’t specify, but it seems like this could be a term policy hitting its annual renewal or an underfunded IUL that’s becoming too expensive due to rising costs. If the grandmother is ready to walk away with nothing, and the grandchild takes ownership, becomes the sole beneficiary, pays the premiums, and promises to take care of the grandparents, I don’t see any impropriety in that situation. Just my opinion, given these possible scenarios.
You’re right, we do need to know what kind of policy it is. I thought it might be whole life, where Grandma was making payments but just can’t afford them anymore. The concern could be elder abuse, where someone takes over the life insurance policy, claims the cash value they didn’t contribute to, assigns the agreed beneficiary, and later changes it to 100% for themselves without Grandma or the family’s knowledge since they would be the owner. You want Grandma to have the money or a portion of it and maintain control.
100% agree if there is cash value, it should stay under her name for the exact bene transfer reason you mentioned. Or at the very least, buy out her position for the amount she would have otherwise received had she just surrendered it.
I agree that leaving my grandmother as the owner is the right thing to do. But from an elder abuse or legal standpoint, if there’s no cash value and the policy would otherwise lapse, does the appearance of impropriety disappear? Grandma has every premium dollar she’s ever paid at risk. Even if she allows her grandchild to assume ownership, she can’t be worse off than if she had walked away from the policy. This is just a legal perspective.