Desperately need help VAL Prudential

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Mkeatty
Posts: 19
Joined: Tue Oct 04, 2016 5:17 pm

Desperately need help VAL Prudential

Post by Mkeatty »

I desperately am in need of help. When I was 21 my mom pressured me to sign up for a $100,000 VAL policy with Prudential. The annual premium is $607 and I have paid this for 17 years. I am not married and have no children. I want to cancel the policy, Against my mom's advice. She thinks it's a wonderful investment tool and easy access to a loan in the future.

I currently have 20 shares of Prudential stock. What happens to this stock if I surrender? Should I sell the stock before surrendering?

I appreciate any advice. I don't trust my mom for sound financial advice on this issue and don't know what to do with this policy. Thank you to all who reply!! :-)
afan
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Re: Desperately need help VAL Prudential

Post by afan »

Your Prudential stock has nothing to do with the insurance policy. You can keep it or sell it. It has no effect on the decision about the policy.

If no one is depending on your income it is unlikely you need life insurance. If your status changes then maybe at some time in the future you will need to provide for someone else and then you might need insurance. If so, buy term.

To figure out what to do with the policy you need to know the surrender value and the total amount of premiums you have paid. If you would get back more than you paid then the difference would be taxable income. If the policy is worth a lot more than what you paid, which is unlikely, then you might consider doing a 1035 exchange for an annuity from a low cost company. This would let you avoid paying tax, but you would have ongoing costs of the annuity. If you go this route, do not buy it from Prudential.

If the taxable amount will be small, then just pay the tax and be done with it.

The insurance company will be able to tell you the surrender value and whether you have a gain.
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mephistophles
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Re: Desperately need help VAL Prudential

Post by mephistophles »

afan wrote:Your Prudential stock has nothing to do with the insurance policy. You can keep it or sell it. It has no effect on the decision about the policy.

If no one is depending on your income it is unlikely you need life insurance. If your status changes then maybe at some time in the future you will need to provide for someone else and then you might need insurance. If so, buy term.

To figure out what to do with the policy you need to know the surrender value and the total amount of premiums you have paid. If you would get back more than you paid then the difference would be taxable income. If the policy is worth a lot more than what you paid, which is unlikely, then you might consider doing a 1035 exchange for an annuity from a low cost company. This would let you avoid paying tax, but you would have ongoing costs of the annuity. If you go this route, do not buy it from Prudential.

If the taxable amount will be small, then just pay the tax and be done with it.

The insurance company will be able to tell you the surrender value and whether you have a gain.
Plus 1
ole meph
Topic Author
Mkeatty
Posts: 19
Joined: Tue Oct 04, 2016 5:17 pm

Re: Desperately need help VAL Prudential

Post by Mkeatty »

Thank you both for your replies. :happy

When I called Prudential, they told me I had a gain. The present cash value is close to what I've paid in premiums, plus I've also received dividends (albeit small) over the years. Is there a way to determine how exactly they have calculated a gain?

I take it that both of you agree that dumping the policy is a good idea. The salesman that sold me the policy frequently speaks with my mom and I'm worried that he will share the fact that I've surrendered the policy with her.

Thank you to the both you. :sharebeer
clydewolf
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Re: Desperately need help VAL Prudential

Post by clydewolf »

Mkeatty wrote:Thank you both for your replies. :happy

When I called Prudential, they told me I had a gain. The present cash value is close to what I've paid in premiums, plus I've also received dividends (albeit small) over the years. Is there a way to determine how exactly they have calculated a gain?
You should be receiving an annual statement from Pru that identifies the gain and what was done with that gain. Either paid directly to you, used to purchase additional insurance, used to pay the annual premium or some combination of these options.

Ask your Pru rep how it was calculated, but don't expect a clear cut answer.
I take it that both of you agree that dumping the policy is a good idea. The salesman that sold me the policy frequently speaks with my mom and I'm worried that he will share the fact that I've surrendered the policy with her.
Pru went public in 2001. So 15 years ago you were 21 that makes you about age 36 today. For most 36 year olds, it is time they take responsibility for their own financial decisions. But then most is not all, there may be other things in your life for which your mother believes you should have the life insurance. As others have stated, Term Life will provide more insurance and probably with a lower premium.
Grt2bOutdoors
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Re: Desperately need help VAL Prudential

Post by Grt2bOutdoors »

I owned a VAL, the PRU stock received has a cost basis of zero, if you sell the gain which you have will be taxes at Long Term capital gains level.

You have a gain, that is surprising given the level of fees they take out.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
clydewolf
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Re: Desperately need help VAL Prudential

Post by clydewolf »

Grt2bOutdoors wrote:I owned a VAL, the PRU stock received has a cost basis of zero, if you sell the gain which you have will be taxes at Long Term capital gains level.
I know this has been working through the courts.
Here is some information that says your basis equals IPO price, assuming you have paid at least that much in premiums.
http://www.costbasis.com/stocks/demutua ... hares.html

Also you can give your shares to a qualified charity, and then take a Schedule A deduction of the value of the shares on the date given. I did that with some Met shares received from demutualization.
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mephistophles
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Re: Desperately need help VAL Prudential

Post by mephistophles »

Keep it simple. Very simple. For all information regarding your policy, call Prudential and request the VAL unit that specializes in variable appreciable life. They will have the answers to your questions.

Your relationship with your mother and the Prudential agent she talks to is entirely personal and up to you to decide how to handle. Bogleheads is
probably not a good place to get advice on personal familial issues.
ole meph,
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