Daily also objects to VUL illustrations that are modeled off a constant rate of return. "You have to have some idea of the plausible range of results given the variability in the rates of return," he says. "The variability month by month, year by year, leads to an enormous range of premiums to keep the policy in force."

Some advisors argue that, when used correctly, variable universal life can be a valuable tool. Benton of Lincoln Advisors says a VUL offers flexibility in estate planning. In one example, Benton says he used a VUL as part of the funding in a generation-skipping trust for an older client. The VUL was funded with $500,000 from the sale of a heavily concentrated stock position. "Because it's a life insurance contract, it doesn't produce any taxable income."

Another client is using a VUL to replace a fixed contract in an irrevocable life insurance trust-a tactic that will lead to a larger death benefit. "Every now and then [VULs] get attacked in the financial press, but I think over the long-term the industry will make them better," Benton says.

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