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When is the best time to buy an income protection plan?  The answer is – right now.  It should be done before any health challenges arise that preclude prospects from getting this valuable coverage, or the premium becomes too expensive due to older ages.

Start the conversation with young couples, ages 25 to 45 – they are the top prospects for income protection.

They’re purchasing homes and starting families – it’s an ideal time to build a foundation of financial protection.

Individuals in this age group still have a lifetime of earning potential.  Income is their most important asset, as their lifestyle and long-term financial plans depend on it.  A 33-year-old taking in 60k annually will earn approx. 3.5 million by age 67 with a 3% annual increase.  Many would agree that’s an asset worth protecting.

Remind clients how long it took to build their current savings and retirement funds – assets that can be swiftly impacted and depleted due to an illness or injury that prevents them from returning to work in a timely fashion.

While single, full-time wage earners, new home owners, and families just starting out are top prospects – don’t forget about your current life insurance holders, and auto policy owners with higher limits.

Talking Points:

Explain what’s at risk – a lifetime of earning potentially lost due to an illness or injury. (www.whatsmyeiq.org)
Lay out how Disability Income Insurance can help cover expenses during recovery.
The time to purchase this coverage is now – the premium will never be lower.

We have client approved marketing tools available to help you prospect your current customers while reaching new ones.  Contact your Disability Expert to learn more about growing this corner of your business.

The most common strategy that wealthy and healthy taxpayers use to fund against unavoidable anticipated estate tax liability is to purchase life insurance in an irrevocable trust; funding the trust with gifts so the trustee can pay the premiums.

Transfers to the trust can be protected from gift taxation by using either available annual exclusions or the grantor/donor’s lifetime exemption.  At the death of the insured the proceeds are not included in the taxable estate, but the funds are available to buy assets out of the estate to provide liquidity necessary to pay estate taxes.  All is right with the world!

But what happens if the insurance is later needed for other purposes outside the trust and back inside the taxable estate?

Careful advisors take the precaution of having the policy in a grantor (or defective) trust that by its terms allows the grantor/insured to purchase the contract out of the trust.

The practice is common and allows for broad future planning options.  In the past no one was quite sure if reserving the power to repurchase the coverage didn’t constitute an “incident of ownership” in the policy that would draw the death benefit back into the insured’s taxable estate, even if they didn’t buy the policy back.

Not to worry!

If your clients are concerned then suggest that they ask their legal or tax advisor about Rev. Rul. 2011-28 which determined that the right to repurchase does not create an incident of ownership so long as:

The trustee was obligated to assure that the purchase price paid was adequate.
The transaction didn’t shift benefits among trust beneficiaries.

With these provisions in place a trustee can buy life insurance inside the trust without fear of using up a grantor’s insurability that might be needed outside the trust at a later date.

Take the planning flexibility one step further.

Assume a policy was purchased back from the trust because the grantor/insured needed it for collateral on a business loan (and couldn’t get additional coverage because of medical issues that arose subsequent to the original purchase date).  Once the need has passed (i.e. repayment of the loan) the grantor can sell the policy back to the trust without fear, if properly done, of either:

The 3-year look-back rule for purposes of estate taxation, because the policy was sold and not gifted to the trust
A transfer-for-value for income tax purposes, because the sale to a grantor trust by the grantor is deemed a transfer to himself.

Call if your client has concerns about the flexibility he or she may have getting proposed trust-owned life insurance back out if needed down the road or, for that matter, the sale of an existing policy to a trust.  Call, too, if you want a copy of Rev. Rul. 2011-28 to read or to pass on the client’s legal or tax advisor.

Someone who loves and cares for a family member with special needs may be concerned about ensuring that their loved one continues to receive the care he or she needs throughout their lifetime.

How can you build a foundation for the future of your client’s family member with enough resources to maintain a high quality of life?

When a Special Needs Trust (SNT) is properly funded with a Life Insurance policy, you are providing a great supplement to their existing government benefits and creating comprehensive solutions for a special situation.

We can guide you through the process of creating a Special Needs Trust to assist in providing the care for your client’s special needs child.

The opportunities to increase your Life sales using SNT’s are vast:

Establishing a Protection UL within the trust
Planning for all family members
Supplementing Government benefits that are already in place
Creating relative independence for the loved one

Planning for special needs is one of the most important pieces to a prospective client’s portfolio.  More than ever, individuals are looking to secure a comfortable future for those they care about most.

However, individuals with a special needs family member have the daunting task of discovering a strategy to protect their loved one while trying to find time in their schedule to do the research.  This creates a great opportunity to assist them in a time of need.

For more information on Special Needs Planning please contact your Life Sales Marketing Manager today!

Gastric ulcers, also known as peptic ulcers, are localized areas of erosion in the stomach lining that result in abdominal pain, possible bleeding and other gastrointestinal symptoms.

The most common cause of these ulcers is infection of the stomach by bacteria called Helicobacter pylori (H.pylori).  Other risk factors include alcohol use, smoking and use of nonsteroidal anti-inflammatory drugs (NSAIDs).

Ulcers that are successfully treated with good follow up and documentation of healing generally get more favorable underwriting outcomes.

One of our A+ carriers offers competitive underwriting for this condition.

Take a look at this case study:

59 year old male
$1 million of Term coverage
5’9”, 140 lbs
Lifelong non-smoker
No adverse family history
Diagnosed with a non-bleeding gastric ulcer in 2014. Takes over-the-counter medication for heartburn symptoms
No alcohol use

Underwriting Decision: Select Preferred!

Contact our Underwriting Team for more information and let us help you find ways to generate more sales with great underwriting offers!

As you’ve all experienced, the majority of your clients who are couples come together as a packaged deal.  So what happens when a couple applies for a Long-Term Care Insurance (LTCi) policy and only one is approved?

In most cases, the spouse who received the green light may no longer want a policy with a carrier who rejected coverage for their significant other.  And even worse, they may decide that they no longer need coverage at all.

The reality is – if one spouse is declined, it is even more crucial that the insurable spouse has a plan in place.

Convincing the insurable spouse to proceed with the plan

Client Objection:  “My spouse was declined so I do not want to take my policy.”

In this case, it is probable that the healthier partner will attempt to care for the other – with whatever financial, physical, emotional and mental demands that are required.

Your Reply:  “Caring for a loved one could either be met with minimum effort or it may be very strenuous.  And while personally caring for your significant other, you may have do to dip into your savings, leaving little funding left for your own care.”

You Ask:  “Would you be ready to go it alone and take care of all those new tasks that arise in a situation like that?”

Once you’ve overcome the objections, we will help you make certain your clients have the right LTCi plan in place to meet their needs.

Contact your LTCi Sales Rep for more information.

The need for income protection in this country is clear – statistics show a common lack of personal savings amongst the majority of households.  And top earners are not immune.

Although major corporations typically provide Disability Insurance (DI) through employer sponsored programs or voluntary employee-funded group DI plans, most physician and executive programs insufficiently limit benefits to a fraction of earned income – creating a great financial shortfall for high-income individuals.

The answer?  A prescription of raised limits of DI throughout the market.

A high-cap excess personal DI is a great way for physicians, attorneys, accountants, and white-collar executives to find appropriate levels of economic safeguard.

We can provide a variety of “third-tier” Income Protection products to meet your client’s needs – and ensure the financial safety of your affluent and under-insured clientele.

The plan can be as simple or comprehensive as your clients’ needs require

Securing individual DI is another obvious step – but again, traditional domestic disability carriers frequently fall short with their maximum issue limitations.  If you have any clients or prospects who are making over $250,000 annually, they should be insured at least up to 65% to 75% of their earnings.  Their protection needs may not be met by group coverage even with the addition of a layer of individual DI.  The bundling of group and individual DI alone is not always a sufficient solution.

As a life/health insurance advisor, you know better than anyone that a sudden injury or prolonged illness can happen to anyone at any stage of their professional career.

Contact your DI Specialist for more information on “Third-Tier” coverage.

The story of the prodigal son alerts us to the risks involved in completely turning assets over to our children without some restraints on their control of the property, lest they waste their substance on riotous living.

Taxpayers are often encouraged to do this by consolidating assets under the umbrella of a Family Limited Liability Company (Family LLC).  The entity is structured with two classes of ownership interest, one voting (usually 1-2% of the total interest) and the remainder non-voting, initially both classes owned by one or both of the parents.

The folks can then give away portions of the non-voting interest to the kids (protected from gift tax either through use of annual exclusions or the parents’ lifetime exemptions) allowing growth on the value of the transferred interests to occur outside their taxable estate all while maintaining complete say-so in how the company (i.e. its assets) is/are handled by virtue of their retention of all the voting rights.  This could also mean that they are reducing their allocation of any year-end earnings (especially if the LLC is taxed as an S-Corp), but this effect can be reduced through a salary paid to the parents for management of the company.

But the two-voting-class LLC can also allow for more effective use of the exclusions and exemptions.  A simple calculation suggests that giving 50% of a company with a $1,000,000 fair-market-value to your kids would constitute a $500,000 gift.  But, for now at least, a reasonable discount on the valuation of the transfer is allowed due to the transferred interest’s lack of marketability and voting rights.  So a successfully argued discount of 25% would result in a reportable gift of only $375,000.

But if those on the House of Ways and Means Committee proposing the Build Back Better Act have their way the discounting bonus available through use of Family LLC could be dramatically reduced.  The bill must make its way through the House Rules Committee and then the full House before even considered by the Senate, but in its current form it would disallow any such discount on the transfer of “non-business assets,” defined as passive assets held for the production of income and not used in the active conduct of a trade or business.  The most obvious example of non-business assets are marketable securities held in a Family LLC.

The announcement should serve as an urgent planning alert as the proposal, if left unaltered, would apply to transfers after the date of enactment of the BBB Act.

Call for assistance on any planning issues involved in your work at either 706-354-0401 or tom@cpsadvancedmarkets.com.

The talk of the town regarding possible changes to the transfer tax laws under a new Congress and administration has been what might happen to the estate and gift tax lifetime exemption.  Currently every taxpayer can shelter (either through lifetime giving or at death) up to $11,700,000 of their taxable estate from the ravages of federal death taxes as high as 40%.  Under current law the exemption amount was set to reduce by 50% on January 1, 2026.

Talk on the Harris/Biden campaign trail was the preference for an immediate reduction of the exemption to $3,500,000 per taxpayer and a maximum rate of 45%.

On September 13, the House Ways and Means Committee gave us the first glimpse of what the future may hold when it released its proposal for the Build Back Better Act, some 600-plus pages affecting everything from soup to nuts.  Changes to the lifetime exemption in the draft are somewhere in between the positions above.

The proposal would simply move the current 1/1/26 reductions to January 1, 2022.  Not the worst thing in the world, I guess.  Except now clients may only have 90 days to take advantage of the inflated exemption amount rather than four years.

Some considerations before pursuing this strategy:

Significant transfers of property would be involved. Is the client willing to “let go” of the control of that much of his or her net worth?  If not, consider a Family LLC to hold assets where only non-voting ownership interests are passed to donees.
Since donees assume the income tax basis of the donor, consider transferring assets in which your clients have the least gain. Leave appreciated assets at death when heirs have the advantage of a step-up in basis!
To benefit from immediate gifting the total amount transferred must at least exceed the anticipated reduced amount of the exemption – in this case $5,700,000. For example, if a taxpayer with a current $11,700,000 exemption gifts only $5,700,000 and the new law reduces the exemption to $5,700,000, he or she will be deemed to have used their full exemption.  The window for use of the prior (and unused) additional $5,700,00 will be closed.
Married couples have two exemptions to work with. Exhaust the exemption of one first by attributing all giving to one spouse.  This may require changing ownership in property from one spouse to the other prior to gifting, so be careful of community property where each spouse will be deemed to have given one-half the value unless changes in ownership are made.

The good news is the BBB Act proposal makes no changes to the step-up in basis an heir receives on inherited property under the current law.

Call with questions regarding these issues or with any planning questions you have on your casework at 706-354-0401 or tom@cpsadvancedmarkets.com.

Back in the old days when income tax rates were as high as 91% (Holy Mama!) income-shifting was the flavor-of-the-month as high-net-worth taxpayers took steps to get income attributed to persons or entities in lower brackets.  A popular depository was a trust which, back then, was taxed at much lower rates than individuals.

In response the “grantor trust rules” were implemented.  Now when a grantor retains too much power over or benefit from trust assets the trust is deemed his or her alter-ego for income tax purposes.  Gains and losses incurred by the trust now flow through and are reported on the grantor’s tax return.

But as subsequent changes in the law dramatically reduced individual rates and compressed the trust tax brackets, paying the income tax for the trust became preferable and most trust were set up as intentionally defective grantor trusts.

Payment of the trust taxes was, in effect, a gift to the trust that didn’t require use of annual exclusions or lifetime exemptions to protect the transaction from gift taxation.

In addition, alter-ego income tax status allowed the grantor to sell appreciated assets to the trust without a recognition of capital gains.  And the sale could be done with a low-interest promissory note where interest payments were not income to the grantor.

Add to all that the fact that the trust could be structured to keep any assets it held out of the taxable estate of the grantor.

The proposed Build Back Better Act released from the House Ways and Means Committee on September 13, could shut down the playground if ultimately passed in anything resembling its current form.

Some considerations:

Any property held in a grantor trust created on or after the final bill’s enactment would be includible in the grantor’s taxable estate.  Any distributions from the trust (other than to the grantor or his/her spouse) would be a gift subject to gift tax.  Sales to the trust would trigger capital gain or, in the case of a life insurance policy, create a transfer-for-value. And the list goes on.

Existing grantor trusts would be grandfathered, but any future contributions to those trusts could be affected by the new law (try to figure that one out!).  And the BBB would not affect planning with traditional vanilla irrevocable trusts (those taxed in the trust income tax brackets and without the powers or benefits held by the creators of grantor trusts).

If a grantor trust is needed and in the works, the best path is to attempt completion and start-up prior to final passage of new legislation.  Meanwhile the bill must make its way through the House Rules Committee, then the full House before being passed to the Senate.  We will keep you in touch.  Call with questions or information on the most current circumstances at 706-354-0401 or tom@cpsadvancedmarkets.com.

Developing a plan for an entire year can be a daunting task.  With so many days ahead of you, it’s easy to get sidetracked and let a few months of inactivity slip and sabotage your success.  It’s time to take a more disciplined approach.

Stay Motivated All Year

Be sure to write down your business plan and place it where you’ll see it each day.  Also set up a repeating calendar entry each week to review the plan and the work you’ve done to achieve it.

“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.” ― Abraham Lincoln

Start small and focus on building a plan with measurable and achievable goals.

Set Goals

Be Realistic – It may sound great if your goal is to increase your Long-Term Care (LTC) Insurance business, but you might be setting yourself up for failure.  Instead commit to making LTC Insurance more fully integrated into your business.
Make Them Measurable – Numbers don’t lie, so use them to make yourself accountable.  Pinpoint a certain number of applications you’d like to write, client meetings you’d like to host, or referrals you’d like to gain.

Create A Plan

Develop A Strategy – Now that your goals are in place, how will you reach them?  Create actionable items to focus on throughout the year.  Maybe it’s simply making LTC Insurance a part of every financial planning discussion you have or it’s committing to hosting quarterly education seminars in your community.
Target Completion Dates – Having monthly or quarterly milestones are a great way to track success, and provides you with ample time to plan ahead.

Take Action

Get Motivated – Your business plan may seem foolproof, but won’t work if you don’t put it into action.  Begin each day with a task to help you meet a specific goal.  You’ll build momentum to keep you focused and productive.
Commit To Your Plan – You’ve positioned yourself for success and have taken the time to establish specific goals, strategies, and deadlines.  Stick to your plan and give it a chance to work

Track Results

Self-Evaluate – Are you ahead of your goals or are you falling behind?  Regularly reviewing your progress will provide you with direction on how to focus going forward.
Make Adjustments – You may find that one approach works, and another does not.  Being flexible will allow you to change strategies to achieve overall success.

We’re here to help – reach out to your Long-Term Care Associate for assistance with your planning.