Q My parents took out a life insurance policy on me when I was a child. They have now given it to me. It has a cash value of about $5,000. What is the best use of this policy?
N. C. , St. Paul
As usual, the answer is, "it depends." Specifically, it depends on your goals. You have several options:
Maintain the policy. You can continue paying the premiums to keep the policy in force. Alternatively, if the policy is "paid-up," meaning no further premiums are required to carry the policy, no action is required on your part.
Borrow against the policy. You can take a loan against the cash value. However, be sure you still have enough value and/or continue to pay enough premium to maintain the policy.
Cash in the policy. This is the "take-the-money-and-run" option. Find out the basis in the policy -- total amount of premium paid since inception -- because any amount of cash value you receive above the basis will be taxed as ordinary income. If there is a taxable gain, you could roll the proceeds into a no-load variable annuity.
Kristin Hannemann, CFP, (30)
Q I recently moved to Minnesota from another state and am driving a car that my parents gave to me as a graduation gift. They are still paying the loan, and it is registered and insured in my parents' home state. I'd like to register and insure the car here but am running into trouble. To register the car, I must own it and have insurance on it. My parents cannot transfer the title to me because there is an outstanding loan against the car. How can I get the car registered here?
The simplest solution would be for you to take out a loan and buy the car from your parents, and then register and insure it in Minnesota. If your parents want to continue to own and pay for the car, they must register and insure it here. You should contact the Minnesota Department of Motor Vehicles to get the registration paperwork and find the best auto insurance rate from a local agent.
Lucas Bucl (25)