The authoress Marjorie Kinnan Rawlings illustrates a hard lesson of life early on in her classic novel, The Yearling. The Baxter family eke out their living on the St. Johns River in the back woods of Florida. The family is enjoying a quiet breakfast when Julia the dog starts barking outside. They all run out only to find that the old bear Slewfoot, the nemesis of livestock in the area, has killed their hog. To make matters worse the pig was their brood sow from whom they anticipated many future piglets – a commodity that would now be in shoat supply.
Despite the poor turn of events, Ma Baxter calmly takes what is left up to the house and begins to butcher the remains for mealtime use.
The moral here – it doesn’t matter what your designs or expectations might have been; if life gives you lemons make lemonade, and if it gives you a dead pig then smoke a ham.
And if it gives you a life insurance contract in which you have taken a beating, do a 1035 exchange!
Think about it. Your client has a VUL policy that has not performed as well as illustrated on the original sales ledger (imagine that!). Consider a contract with a basis of $200,000 that has a current cash surrender value of $100,000, with no light at the end of the tunnel. If the owner decides that “enough is enough” and simple surrenders the coverage he or she is not allowed to declare the loss.
We all wish that those VULs gone-bad hadn’t proven so variable. And we all know that deducting a loss hardly compares to the recovery of that loss. But it is our responsibility to at least inform our clients of the options that may be available that allow them to make the best of an otherwise bad situation. Call us with questions or for discussion.
The 1946 film version of The Yearling starred Gregory Pack and Jane Wyman, both of whom were nominated for Academy Awards for their performances. Neither won.
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