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Wealth Transfer Tools & Insight | Life is Changing

“Wealth Transfer” can hold a different meaning to each client and advisor.  The idea often involves life insurance because of the unique status it has with the IRS – If it is owned properly the death benefit can be paid without income or estate tax. 
 
There are two caveats when comparing investing with insurance:

  1. Make sure you measure “what they keep” not “what they make”.
  2. Understand a projection is not a guarantee; sometimes your client will pay for more peace of mind that guarantees offer. 

Economics of Life Insurance

Some HNW clients have a large IRA they are required to start taking distributions from, but they don’t need the money to live.  With the potential for the elimination of the Stretch IRA, life insurance leverage might be worthy of consideration.

Our first Wealth Transfer idea is for Mr. & Mrs. Smith, a 70-year old couple.  We annuitize $500,000 of their IRA while the market is high, which provides a joint lifetime income of $30,000+.  They would pay taxes and then use less than half of the remaining distribution to replace the asset with a $500,000 second-to-die guaranteed life insurance policy.  They would still have an extra $1,000 per month of spendable income.  If they didn’t want or need the extra cash flow, they could put it all towards the insurance leverage and leave more than $1,100,000 to their heirs.  Launch the following link to learn more . . .

Mr. & Mrs. Smith – Economics of Life Insurance (Example 1)

If your HNW client has a lot of non-qualified money and is on the conservative end of the spectrum, perhaps they utilize an annuity arbitrage play.  You gift and leverage your money.  If they gifted $500,000 the 70-year old couple can buy a paid up $1.3 million death benefit.  They can now annuitize $500,000 and increase their annual spendable amount by $30,000+ a year.  Since this is non-qualified money, tax is only owed on approximately 20% of the income until they have collected their basis.  This can provide additional peace of mind to be less concerned with future market movements or corrections as they have plenty of cash flow and have guaranteed a legacy no matter what the future holds.  

Mr. & Mrs. Smith – Economics of Life Insurance (Example 2)


Having the Wealth Transfer conversation with your clients

The Wealth Transfer Client Brochure is a comprehensive guide which includes several checklists you can use when talking with your clients. 


Life is Changing

Now is the time to have these wealth transfer conversations with your clients.  Why?  Because the market is at a high and life insurance prices are expected to increase.  The cost of life insurance is changing for most products to fit within the new reserve requirements and life expectancy laws.  In many cases, the life insurance most often used for Wealth Transfer will be going up in price or eliminated by January 1st, 2020.  Launch the following link to learn more:  2017 CSO & PBR

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