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

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. 

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. 

Estate Problem Solved

Dorothy is a retired executive with a considerable amount of assets and a complicated health history. She already has $5m in life insurance coverage and still has a need to leverage her money more efficiently. She is also concerned about the distribution of her estate, according to her wishes, after her death. While working with an Estate Attorney and a Financial Advisor, it was recommended that she purchase another life insurance policy to be used as a source of liquidity at her death. 

The tax-free death benefit can be used to:

• Pay Dorothy’s estate taxes 
• Create an estate for her beneficiaries 
• Equalize inheritance among her beneficiaries or
• Leverage annual gift tax exclusions 

The Solution

Female, age 69, Issued Standard Nonsmoker due to a complicated medical history

MVP’s Underwriting Director shopped this case to several carriers before an application was written. Most carriers were quoting best case scenarios as Standard with a T6-8 rating. The carrier that won the business used a healthy life-style crediting program as well as table shaving to get the case to Standard. 

The Policy:

• $1.5m level death benefit with a Lapse Protection Rider, Dorothy’s irrevocable trust is the owner and beneficiary
• Universal Life Policy 
• $38,000 annual premium 

First Year Target Premium: $41,500

Retirement Problem Solved

Dr. George’s agent performed a policy review with him and uncovered the fact that he would have a retirement shortfall because a current life insurance policy wasn’t performing suitably. Like many people today, George knows he must build a retirement pool of his own because traditional retirement vehicles are not substantial enough to maintain his current lifestyle.

Life Insurance in Retirement Planning (LIRP) can provide George with access to the potential policy cash value via tax-free loans and withdrawals to supplement his other sources of retirement income. If George dies before retirement, the life insurance tax-free death benefit provides cash to his family to compensate for the loss.

Retirement Solution

Male, age 67, Approved Standard Nonsmoker due to medical history 

The Policy:

• $1,770,000 initial death benefit, he is the owner and his wife is the beneficiary
• Indexed Universal Life Policy*
• $900,000 single premium via 1035 Exchange from existing life insurance policy

First Year Target Premium: $91,000

*MVP Financial used proprietary software to compare multiple products and carriers to determine which policy could provide the highest amount of cash flow.

Business Problem Solved

Ken is President, CEO and part owner (with other investors) of an equipment company. Ken handles the day to day operations and is responsible for growing the business. Most of the company’s value is derived from Ken’s experience and skill set which is crucial to the success of the business. The company is looking to protect the interests of the investors and provide debt protection. Additionally, Ken is key to his family’s current and future financial security.

Premature death can cause financial hardship to Ken’s business partners and his family. Purchasing life insurance can provide financial protection with a tax-free death benefit to the company and his family.

The Solution

Male, age 55, in good health, Approved Select Preferred as the best available class

Policy #1:

• $10,000,000 death benefit, the business is the owner and beneficiary
• Term UL Policy Guaranteed for 10 years
• $15,070 annual premium
  
  Policy #2:
• $1,500,000 death benefit, owned by him with his wife is the beneficiary
• Term UL Policy Guaranteed for 15 years
• $2,971 annual premium

First Year Target Premium: $18,000

Additional Estate Planning insurance solution is currently in the works. 

Fact Finders: The Facts Can Make the Sale

These handy detectors are easy to use, ask the important questions and are an excellent way to start a client conversation in a meaningful way. It’s the right thing to do to help your clients plan appropriately for their future while protecting your reputation and increasing your bottom-line.

MVP Financial has many Fact Finders available on our website for your use:

• Basic Needs Analysis
• Life Insurance in Retirement
• Blended Families Planning
• Single Parent Planning
• Domestic Partners Planning
• Charitable Planning
• Estate Planning, and more

Retirement Help for Generations

It's National Retirement Planning Week... Retirement planning varies by generation and can be a struggle to find the right approach for each one. However, once you understand the similarities as well as the differences, you can be better prepared to serve all your clients/generations effectively. The more you know about the needs, attitudes, and behaviors of each generation, the better you may be at understanding how to help them achieve their retirement goals.

Like most advisors, your focus has probably been zeroed in on the Baby Boomer generation when it comes to helping your clients with retirement planning. It may be time to start focusing on the younger generations in order to grow or maintain your current practice. As affluent Millennials and Gen Xers age and inherit wealth, they become good candidates for an advisory relationship when looking to protect wealth and secure retirement. 

Maintaining a successful practice is about adapting to change. There are many ways advisors can position themselves to better serve the financial needs of all generations. Use these carrier resources to help get you started.

A Real-Life Solution in 2018

Well now, that was a year! The talking heads have already enjoyed analyzing what occurred over the 365 days of 2017…

The stock market continues an unprecedented rise, while the nation experiences very reasonable unemployment numbers.

Congress has finally passed an income tax relief package. The effect of this legislation will not be fully known for most people until the end of 2018.

Many of the powerful people we have listened to or watched have admitted their human failings, after causing others tremendous pain.

The United States seems to be the target of nature’s fury. Hurricanes, droughts, fires, floods and blizzards. And mass killings are no longer isolated events.

But life goes on for the average person, and our responsibility continues to center around the protection of families and businesses.

Would things be different if everyone owned life insurance? Life insurance: the miracle of creating an instant estate with a signature. An instant pot of income-tax-free money for the people we love, or to the people we owe money to, or to assure that our business can continue without us, if we can't fulfill our promises due to premature death.

And, the amazing value of our product continues to improve. We now have the ability to access that same bucket of money for sustained health care costs. The escalating costs that our elected officials, our medical professionals, pharmaceutical companies, and insurance companies cannot contain.

Oh, by the way, we have products that now allow access to the face amount of our policies if we live too long and need the benefit while we are alive. SERIOUSLY!

During times of uncertainty and stress, we can be and should be a calming, re-assuring voice.

MVP Financial welcomes your partnership and looks forward to being the real-life solution for the protection of your customers in 2018.

Happy New Year!