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The title’s allusion to folk music is appropriate when you consider that the results achieved by exchanging coverage might be music to the ears of a lot of folks!

Not since the “flight to quality” during the 1990s have there been conditions in the economy and the industry that could serve as such strong possible motivation for policyholders to move coverage from their current carrier to another.

Consider:

Ongoing market conditions continue to savage many VUL policies.
The Pension Protection Act has made the jump from traditional policies to LTC-linked products non-taxable.
Many small and large estate plans no longer need cash value building products and would benefit from a transfer to guaranteed UL-type coverage which is currently priced at bargain premium levels.
As conversion options dwindle for level term products, now may be the time to either convert or exchange to another carrier’s permanent coverage if underwriting is available.

As always, compliance with IRC section 1035 can take the tax bite out of the process.

Common questions attend the feasibility of a non-taxable exchange:

What types of product will qualify?
What if the existing policy has loans?
Are there any MEC considerations?
Can withdrawals be made at the time of an exchange?
What if there is more than one insured involved?
What if several policies are being exchanged?

Call us with any concerns that may arise and also to help you find the best product to serve as your clients’ landing place for their next exchange.

We committed to highlighting important needs that producers can address with insurance based solutions.

The following example is one of many Keep It Simple concepts that one of our strategic carriers has developed to help producers recognize opportunities and meet client needs utilizing Life Insurance.

Common Inheritance Challenges

Parents with multiple children understand how important it is to treat their family fairly.  Yet being fair can be a challenge when clients own, and intend on passing down, a family business.

It can be difficult to determine what to do with the business when some children may have played a more active role in the business than others.

Why should your clients be forced to liquidate the assets they have worked so hard to build in order to pass wealth “fairly” to all heirs?

Fortunately, Life Insurance can be a practical solution in these situations.  It provides liquidity at your client’s death which can be used to make sure all of the children receive a fair inheritance.

By helping your clients keep the peace within their families, you will earn their trust — and possibly even other sales opportunities down the line as a result.

For more information about how to use Life Insurance as a key part of an estate equalization strategy, please contact the Sales Team today.

Imagine the thought of not being able to take in a breath, then suddenly gasping for air when you’re able to breathe in again.  Now, you’re probably thinking to yourself this sounds a lot like the feeling you sometimes get with certain not-so-favorable offers on impaired risk cases!

All kidding aside, this is actually what happens with people who have sleep apnea.  An individual suffering from sleep apnea may not even be aware of it while it’s happening, but could still experience symptoms – most commonly, daytime sleepiness, morning headaches and loud snoring.  Sleep apnea restricts oxygen to vital organs and if left untreated, it can lead to more serious conditions such as heart arrhythmias, stroke and diabetes.

Diagnosis is usually made after undergoing an overnight sleep study.  Severity is measured by the Apnea/Hypopnea Index (AHI) which represents the number of episodes per hour.  An AHI score of 5-14 indicates mild severity, 15-30 indicates moderate and over 30 is considered severe.

CPAP (Continuous Positive Airway Pressure) is usually the recommended treatment.  Other treatments may include dental appliances or surgery.  Follow up sleep studies to monitor the effectiveness of treatment are also often recommended.

So what does all this mean for life underwriting?

The key to favorable outcomes isn’t as much the severity at diagnosis as it is the follow up and compliance to treatment.

In some cases, lack of compliance or failure to follow up can lead to highly rated offers and declines.

Take for instance this case involving severe sleep apnea but with good follow up and compliance:

66 year old male applying for $500k of Term coverage
Lifetime non-smoker
Height 6’ 4”, weight 220 lbs
Hypertension, well controlled on Amlodipine
High cholesterol, well controlled on Pravastatin
A sleep study done in 2016 revealed severe obstructive sleep apnea with an AHI of 78 and CPAP treatment was initiated
Sleep apnea is well controlled, without symptoms, and good compliance on nightly CPAP use.

Underwriting decision: Preferred NS for the sleep apnea history!

Place more business and earn more commissions!  Our Underwriting Team is here to help you get the best possible underwriting offer on each and every case.

Bringing up the subject of Long-Term Care (LTC) Insurance is not always easy, but changes may have happened in your clients’ lives that make this the year to talk about LTC.

The annual financial review is a great time to discuss changes that may have occurred over the past year, and proactively plan in anticipation of events that may impact the success of meeting set goals.

Here are six easy questions you can ask to help get the conversation started:

Have you incurred additional expenses because a family member or friend needed care?
Have you needed to adjust your work schedule due to a family member or friend requiring supervision or assistance with activities of daily living?
Have you recently moved a parent or loved one into an assisted living facility or nursing home?
Have you recently become an empty nester?
Are you preparing for retirement?
Are you concerned with the government changes in healthcare and its inability to deliver a long-term care plan?

A ‘yes’ answer to one or more of those questions should help your clients realize that planning for an extended health care event with a long-term care policy makes sense.  In fact, long-term care is not getting old or living in a nursing home – it’s about receiving the care you want, when you need it.

Proper planning will ensure your clients won’t have to depend solely on family or friends for unpaid care, or spend down most of their assets to qualify for government assistance.  The benefits of a long-term care policy will help cover the costs of the care.

Long-Term Care Insurance provides security to families in the event of an untimely health event.  Get the conversation started by asking your clients the right questions at their annual review.  As a result, you may discover changes in health or planning opportunities based on anticipated needs.

Make certain your clients have the right LTC plan in place to meet their needs.  Contact your LTC Sales Rep for more information.

With the access you have to your clients’ financial plans, comes the responsibility to protect their most valuable asset – the ability to earn a living.

Insurance is available for everything from a car to a cell phone, and it’s vital to remind your clients that those things don’t exist without the funds to facilitate them – which is exactly why income protection is so important.

The following statistics highlight the importance of having that discussion:

An estimated 48.9 million people, or 19.4% of the non-institutionalized US civilians, have a disability.
An estimated 24.1 million people have a severe disability.
An estimated 34.2 million people, or 17.5%, have a functional limitation

Social Security is not a reasonable resource on its own – the average SSDI benefit payment is a mere $1,256 for males and $993 for females per month.

Employer sponsored DI plans only pay 60% of a client’s income – plus, the benefits are taxable with a cap on the maximum benefit.  And, less than 5% of disabilities occur as a result from an accident on the job – where worker’s comp would be applicable.

It’s a matter that every advisor should take to heart, especially when most of you know your clients on a personal level.

We have the tools for advisors to start the conversation about Income Protection.  Contact your DI Associate today.

Nobody gets help with college costs nowadays unless they first fill out a lengthy and bothersome form known as the FAFSA (the acronym stands for Free Application for Federal Student Aid, just in case it ever pops up when you choose the Governmental Financial Assistance category on Double Jeopardy).

The information entered therein drives all consideration for aid under all Federal and many State educational programs.

Now here’s the rub

FAFSA has certain eligibility criteria that determines – based on your income and net worth – how much you should be contributing to your child’s higher education.

If the amount they determine you can pay is too high it renders you ineligible for assistance.

And therein lies the additional rub

If you are poor and haven’t paid much of the tax that supports the assistance programs, then you’ll probably get financial support.  If you are rich and paid a great deal of the tax to fund the programs, then you probably won’t get any aid – but no big deal because you’ve got enough to pay the piper anyway.

The people that get hammered are those in the middle who have paid their fair share of the tax and, in addition, have been responsible enough to save, invest, and accumulate against the day of their anticipated retirement – only to find that the net worth that their sound economic behavior has created disqualifies them for assistance.

Here is where you can help your clients

Especially those with liquid net worth considerable enough that is proscribes or prohibits assistance.

The instructions for completion of the FAFSA form direct that in reporting financial information, “Net worth means current value [of includible assets] minus debt.”  For example, a commercial building worth $300,000 with a $100,000 mortgage would add $200,000 to the net worth calculation.

But more important – when adding the value of investments the instructions state that “Investments do not include . . . the value of life insurance . . . [or] annuities . . .”

How many clients do you have with considerable amounts of net worth in low-performing assets like CDs?  And now the value of those assets are creating a roadblock to financial aid.

One simple solution to recommend is the transfer of funds to an annuity contract or an overfunded life insurance policy (they may not have adequate coverage anyway).

The timing of a purchase doesn’t appear to be an issue

In researching this strategy, calls to the FAFSA information line drew the response that an annuity or life policy was exempt so long as it was in force at the time of the completion of the FAFSA application.  Needless to say, a client should do his or her own spadework in this regard before making a decision.

Once the child is graduated or no longer in need of assistance, funds can be transferred back into the investment opportunities of choice.  From the time that inquiries into possible financial aid begin until the event of a child’s graduation is usually long enough to purchase an annuity with an acceptably short surrender charge period – especially if the 10 o’clock scholar involved is one inclined to pack four years of higher education into six.

Contact us for the best product opportunities available for clients who are prospects for this FAFSA Net Worth Minimization Strategy.

Do you have clients that originally purchased a Deferred Annuity to find that they no longer need it for retirement income purposes?  Often, these clients intend to “leave it for the kids.”

Although a Deferred Annuity is a great vehicle to accumulate funds for retirement, it is not an efficient vehicle to transfer wealth since it may be taxed twice at death.

How can your clients avoid this?  By reducing or replacing the Annuity with more tax-efficient assets.

How It Works

Annuity Maximization is simply an asset repositioning strategy in which the Annuity is exchanged or converted to a Single Premium Immediate Annuity (SPIA).  A SPIA provides an income stream for a chosen number of years based on a single deposit made to purchase the Annuity in addition to your client’s age and health status.

Your client may then make gifts of the after-tax income generated from the SPIA to an Irrevocable Life Insurance Trust (ILIT).  The ILIT then has the funds to purchase a Life Insurance policy on your client’s life for an amount that replaces or exceeds the value of the Deferred Annuity, to benefit the heirs.  The Life Insurance policy pays out the tax-free death benefit at the end of the client’s life.

You want to be sure to avoid taxation on your client’s Deferred Annuity as it can be taxed up to 70%.  By converting the Deferred Annuity to a SPIA and then leveraging the SPIA income withdrawals to purchase Life Insurance, you’ve created a simple solution to increase the amount transferred to the heirs of your client.

For more information on this plan or any other Life Insurance sales ideas please contact your Life Sales Marketing Manager.

The need for long-term care does not discriminate.  No matter what your income is, your marital status, or any other demographics that come into play – when you need long-term care, you need long-term care.

Clients with families and children typically consider themselves to have a “default” caregiver, someone who will always be on call if they were to encounter a long-term care situation.  But what about your clients who do not have any children?  How do they approach their need for long-term care?

Although couples may face the same long-term care risk as families with children, their situation may create a different set of challenges.

Not having a “default” caregiver in the form of a child can force your clients to think creatively about their long term care strategy.

Ask your clients, how do they want to live their life?

Living life without children opens up new possibilities and introduces some unique challenges.  They may have more freedom to delve into their career and explore their interests.  Yet, they may need to put more thought into long-term care than people with kids.

They could have a heightened need for professional assistance, since an adult child won’t be “on call” when and if they need help.  And, if they’re part of a couple, they might bear a greater part of the work of providing care than they would if they had children.

Accidents, chronic illness, or simply the effects of aging could all result in a need for long-term care in the future.  That’s why it’s important for everyone to take steps to preserve their quality of life and financial assets as they age.

We’re here to help you design a plan that is both affordable and provides the best solution for your clients’ needs.  Contact your LTCI Sales Rep for guidance.

Disability Insurance is designed to protect against income loss due to an insured’s injury or sickness.  But what happens if they need to take time off work to care for a loved one who is seriously ill — such as a child, spouse or parent?

More than 65 million U.S. adults provide care for a loved one – and many of these caregivers must strive to balance their commitment to helping those they hold dear with work responsibilities.

The Compassionate Family Care Benefit included with a DI Protection Plan is designed to help pay the bills if income is reduced due to missing work while coping with a loved one’s serious health condition.  And it’s available with an Individual DI policy – at no extra cost.

How the Compassionate Family Care Benefit Works:

Remember the 20/20 Guideline – the insurance carrier will pay the Family Care Benefit (after the benefit waiting period) if your client works 20% fewer hours, resulting in an income loss of 20% or more.

For more details, contact your Disability Income Specialist.

i. The lost income must be the result of taking time off work to care for a family member who has a serious health condition caused by injury or sickness. The benefit waiting period will begin on the first day of the family member’s serious health condition.
ii. Insureds don’t have to work fewer hours or lose income during this period. Family member includes a parent, spouse, domestic partner or child (including an adopted child, stepchild and child of a domestic partner). Qualifying for the benefit requires documentation of insured’s income and employment – and will need to show that a family member has an eligible serious health condition and is experiencing one of these situations: receiving inpatient care in a hospital, hospice or residential medical care facility, requires substantial supervision due to severe cognitive impairment, is unable to perform two or more activities of daily living without hands-on or standby assistance or is terminally ill with a condition that is reasonably expected to result in a death within 12 months.
iii. The serious Health Condition must be caused by an injury or sickness that first occurs or manifests itself after the Policy Effective Date and before the Termination Date
iiii. Not available in all states

You can’t eat your cake and have it, too! 

We’ve all said it many times and in every case we were talking about more than just desserts.  Layered within the phrase is the more subtle and intended message that you can’t have it both ways; or that to get something you’ve got to give up something else.

Our conversations are peppered with idioms, those oft-used little word-packages whose literal meaning have nothing to do with what they actually communicate.  For the outsider struggling to learn the language, idioms can cause more roadblocks to understanding that all the other irregularities of grammar and spelling that attend the King’s English.  And it gets more confusing when an idiomatic truth proves unreliable; as in the case of grantor trusts.

These grantor/intentionally-defective/irrevocable/lay in the house that Jack built/life insurance trusts turn the idiom on its head by allowing, from at least a tax perspective, a taxpayer to have it both ways.

Consider the advantages a grantor trust can provide if all is properly done:

For estate tax purposes:  All property in the trust is not included in the trust-maker’s taxable estate, offering significant tax savings on both the original principal and on appreciation after transfer to the trust.
For income tax purposes:  The consequences of all that takes place in the trust flow back to the personal return of the trust-maker.  This a) allows more control over the severity of the tax – especially if the maker has certain tax advantages in play, and b) avoids depletion of assets in the trust to make tax payments and, by paying the trust’s tax, allows for a gift tax-free benefit to the trust by the maker.

Let’s keep the ball rolling.  While the maker is enjoying the best of both tax worlds, he or she also benefits in that:

Assets in the trust are protected from the claims of the maker’s creditors.
If the maker is married, he or she can maintain remarkable degrees of vicarious control over and access to property in the trust by establishing a life estate in the spouse.

If you want to hide a barn you shouldn’t paint it red.  It’s no surprise that a planning device with this many advantages has caught the attention of the lawmakers.

If lack of familiarity with common idioms is hampering you then it’s time you pulled yourself up by your own bootstraps, put your nose to the grindstone, and began to get the lay of the land on such things.  Or simply contact me with questions that come up in your casework concerning grantor trusts, at 706-354-0401 or tom@cpsadvancedmarkets.com.  When we are done you will know your noodles.

By the way, my Mother never quite got the hang of making cakes from scratch.  Her marble cakes were always so hard we just took them for granite.