ajchien

August 17th, 2016 at 6:50 PM ^

It depends. I went through this with my company's CPA a few years back. If the premiums are paid with after-tax dollars then the benefits will not be taxed. If the premiums are paid with pre-tax dollars, the benefits are taxed. Most choose to go with after tax premiums to avoid getting taxed on the benefits.

dmac24

August 17th, 2016 at 8:29 PM ^

It's really a deferred compensation package. 80% of deferred comp plans at the corporate level are funded by life insurance. It's a major tax loophole and also doesn't fall under ERISA guidelines (ERISA stipulates that what you do for the CEO you must do for the lowest ranked employee. 401k plans and most group insurance plans fall under these rules). By using a life insurance policy to fund his deferred comp, they don't have to pay the student managers $2M every year. It's a way to compensate your most important employees in a way you'd like while tying them to your organisation.

PopeLando

August 17th, 2016 at 11:32 PM ^

Theoretically they could also try to make Harbaugh a union unto himself, which would mean that his benefits don't have to follow the non-discrimination rule. Or they could argue that he is a qualified separate line of business...

Lol somewhere my ERISA attorney just had an aneurysm

PopeLando

August 17th, 2016 at 6:31 PM ^

Life insurance isn't part of the estate tax, unless the beneficiary designation or his will say that the payouts are part of the estate.

The article didn't say what kind of product it was, but damned if it doesn't sound like a Universal Life product, which is just an awful way to get life insurance. Harbaugh is most likely using this as another financial/retirement product. Before you think to do the same, don't. Unless your company will pay the premium. Then do.

In almost all cases for individuals, I'd recommend Term Life insurance, and invest your premium savings.

jakerblue

August 17th, 2016 at 8:27 PM ^

Where the hell are you going to invest the premium savings right now. I have a hybrid through northwestern mutual, premiums are lower than universal but you can use it as an investment vehicle, returning almost 5% a year, no idea where else you can expect to get get a consistent 5% a year in this environment.

PopeLando

August 17th, 2016 at 8:55 PM ^

I don't invest in life insurance at all. 5% returns are not enough for me when the 2009-2014 market run-up yielded market returns of like 15% per year. Also, I've seen a lot of life insurance products marketed as "retirement savings vehicles" that are little more than illiquid scams (though, to be fair, if you find a good one and use it right, they can work).

Keeping fees low, dollar cost averaging in, and riding the rough patches is a good long-term strategy in my book. If you don't know where to invest, a vanguard total market fund or S&P 500 index are a decent bet that will pay off in the long term.

Required: the above does not constitute financial advise, and reflects my opinion only.

PopeLando

August 17th, 2016 at 11:34 PM ^

You can't *for a life insurance product* but I wouldn't be happy with 5% ROI for a long term rate of return. If he's truly getting a 5% return net of fees and that's a guaranteed return, then that's great and it's a good part of his portfolio. But a) I doubt that there's no catch, b) it's silly to tie up your money in a single investment like that, c) even if the stock market takes a dip - and it will at some point relatively soon - that's a buying opportunity, and d) it's probably *still* not the the best way to get life insurance.

Your point above about "falling off a log" is absolutely accurate, btw. Rising tide lifts all ships and so on. I guess I'm saying that I gravitate towards low-fee, more-liquid investments, and for individuals with lower net worth life insurance as an investment backfires just as often as not, even without taking predatory marketing into account - and there is a LOT of predatory marketing.

dmac24

August 17th, 2016 at 11:44 PM ^

98% of the time you're right. Most companies complicate the product too much to where they get the benefit and not the client. But for a segment of your overall portfolio, there's a couple of companies that do it right and would fit some of the goals you're looking for, without all the hassles you described.

bluebyyou

August 17th, 2016 at 10:40 PM ^

The various iterations of whole life insurance can be used for a host of different things, such as trust assets that can be gifted by the maker of the trust.  Depending upon how long the insured(s) live, the rates of return can be very good.  It's also a way to ensure that the tax implications that go with the death of an owner of a family business, farm or ranch, can cover taxes that otherwise would have to be raised, often by breaking up or selling the asset.

GoWings2008

August 17th, 2016 at 11:07 PM ^

Cash value life insurance grows tax free, wour somewhat tax deferred. You pay tax on the gains if you can it out. If the owner dies, beneficiaries get the death benefit tax free. Some companies, such as mutual companies, are better at CVLI than others, so do your homework. Low expenses, low morality and lapse rates ask factor in.

benny2benny

August 17th, 2016 at 7:52 PM ^

Gregg Henson is back on WDFN ( https://twitter.com/GreggDrewandJim ) from 3-6. The new show started today and he's way better (especially when it comes to Michigan football) than anything on the Sparty station. The biggest reason 97.1 gets the highest ratings is because they carry the Tigers and are on FM. If you put Jamie and Wojo during the afternoon drive on 97.1, I'll guarantee they'll get higher ratings than Valenti and his lap dog Foster.