Tuesday, October 23, 2018

Gift Tax Problem Solved

Mr. and Mrs. Hall are working with an estate attorney. They have a life insurance need and the ability to pay the premium but have limited ability to make gifts to a trust. They would like to secure life insurance coverage but do not want to pay gift taxes. The attorney determined the amount needed, and the task was to figure out how to pay for it.

Financing life insurance premiums is a gift tax efficient method of getting assets into an irrevocable life insurance trust (ILIT) to pay life insurance premiums. Premium financing involves the trustees of an ILIT to enter into a financing arrangement with either commercial lenders or with the grantors of the ILIT. This concept is especially useful in situations where the cost of the life insurance premium exceeds the gifting ability. Leveraging the loan interest and the donor's gifting ability usually allows large life insurance premiums to be paid at a fraction of the gift tax cost.

The Solution
Female, age 54 Issued Preferred Non-smoker

Male, age 54, Issued Preferred Non-smoker               

Policy #1:
  • $2.5m death benefit with Chronic Illness Rider, the Family Insurance Trust is the owner and beneficiary
  • Survivorship Indexed Universal Life Policy
  • $21,000 annual premium
Policy #2:
  • $7.5m death benefit with a Chronic Illness Rider; his personal ILIT is the owner and beneficiary
  • Indexed Universal Life Policy
  • $138,000 annual premium
First Year Target Premium for Both: $104,000 and $55,000 in excess premium

Tuesday, October 9, 2018

Affordable Life Insurance is Possible after Breast Cancer Diagnosis

Your clients who have a history of breast cancer are eligible to qualify for affordable life insurance rates because more carriers consider an applicant's full medical history for the best possible rating. Since the advancements in treatment, underwriters have loosened the reigns for more favorable life insurance coverage.

According to the Susan G. Komen website, breast cancer mortality has declined by 39%, yet 266,120 new cases of breast cancer (for women and 2,550 for men) will be diagnosed this year. Insurance companies will look at the entire breast cancer history (including pathology reports), and some will be more favorable than others. That's where working with MVP Financial can help...

Underwriting the mortality risk for breast cancer varies with the stage of the cancer. Non-invasive cancer has a better diagnosis than invasive tumors. Tumor size is an independent foretelling factor and each involved lymph node worsens the prognosis. Lifelong follow-up is required by the patient to detect relapses, which can occur decades after the initial diagnosis. Good and consistent medical follow up by your client will provide the full picture and is extremely important to the underwriting process.

To get started with the underwriting process, use this Breast Cancer Questionnaire from NAILBA for your clients that have been diagnosed with breast cancer and contact MVP Financial.

~There is never a guarantee of insurability and every case is handled individually. 

Tuesday, September 25, 2018

Paying for Healthcare in Retirement Problem Solved

Mr. and Mrs. Johnson are thinking about retirement. Like many Baby Boomers, they face the challenge of saving money for retirement and managing future healthcare costs. The Johnsons find themselves with insufficient personal savings to pay the bills if one of them gets sick. To protect themselves and cover this long-term care gap, they could purchase a standalone LTC policy so that they don’t have to experience a financial shortfall should an LTC event take place for either of them during retirement.

After some exploration, the Jonson’s decided that a standalone LTC policy didn’t provide enough flexibility for them and had potentially increasing premiums that lasted too long.  They also didn’t like the fact that if the traditional LTC coverage is never used, they get nothing for the premiums paid.  In other words, they didn’t like the “use it or lose it” nature of traditional LTC coverage.

Instead, they opted to add a chronic illness rider* to a permanent life insurance policy which would allow the death benefit to be used for care while living.  If not used for care, the (remaining) death benefit provides a tax-free payment to the beneficiary.  Unlike traditional LTC, these hybrid-type solutions can be structured to have short premium payment periods and the premiums can be structured as  guaranteed.  And many plans have a significant surrender value if the clients decide coverage is no longer needed.

The Solution
Female, age 60, Issued Preferred Non-smoker

Male, age 60, Issued Preferred Best Non-smoker              

Each Policy:
  • $500k level death benefit with a Chronic Illness Rider, Mr. and Mrs. Johnson are the owners of their own policies and the beneficiaries of each other’s 
  • Guaranteed Universal Life Policy 
  • $10,942 annual premium for her and $10,912 annual premium for him – Payable for 20 years, with no premium thereafter, and coverage remains inforce through age 105 – guaranteed
First Year Target Premium for Both: $20,300
*Interesting note: An LTC certification is not needed to sell most chronic illness riders on a life insurance policy.