Ever faced with an estate planning case that where Life Insurance would be the best resource to pay for a client’s estate taxes?

Have you had the same scenario, but the client was uninsurable?

When advisors are faced with an uninsurable they tend to walk away from the case; however, maybe you should be thinking outside the box!

Take the case of Mary. Mary is 75, and has had many health impairements. Mary has a combined estate of $50M, and is faced with a hefty estate tax bill should she pass.

Mary is someone that has never had the opportunity to get around to her estate planning, and neither did her husband. He has long since passed, and Mary has now become aware the the problem rests on her shoulders of what to do with the estate taxes, and decrease the tax burden for her children and grandchildren.

However, in this case, Mary has one last option left….She can borrow a life! That’s right! Borrow a Life! Some advisors have heard of this strategy, but not all of us, and I would like to resurface this powerful phrase and planning strategy.

Mary has 4 children and 10 grandchildren. But where are we going to get the Life to Borrow? The children are younger than her, and obviously the grandchildren don’t make sense. So where do we go? How about using another GRANDPARENT! That’s right! The benefit of having married children whose spouses might have healthy living parents leads to the opportunity of insuring another grandparent along with Mary in a Second-to-Die Life Insurance policy covering both grandparents.

If you have stumbled across a case like this in the past – why not revisit it!

Feel free to contact your Brokerage Manager with any questions!

As Part 2 of this 2 Part Series, I would like to discuss strategies involving Corporate Split Dollar.

These days it seems that advisors have gone astray from the Corporate and Business Markets and have focused mostly on pre-retirees and baby boomers, and after almost 10 years with the final regulations of Split Dollar being announced, many advisors still think it’s not a viable opportunity.

However, to many a surprise, I’d like to say it’s still a strong life insurance / deferred compensation strategy for Corporate Execs., and Business Owners. But let me warn you, you better know what you are doing before you get into this space – there are many disasters that could happen if you don’t know what you are doing.

Split Dollar Life Insurance Planning has been one of the most popular and significant forms of executive benefit planning, and are merely a method of paying for one’s life insurance.

It can come in two different flavors, Loan Regime Split Dollar and Economic Benefit Split Dollar – there is also a hybrid form of this planning known as Switch Dollar. Switch Dollar basically starts out as Economic Benefit Split Dollar and “Switches” to a Loan Regime when the One-Year Term Rates of the EB Plan become cost prohibitive.

Although this Part 2 could be a book long discussion, I’m going to keep it simple, and focus on Loan-Regime Split Dollar.

Here is the profile you are looking for with this strategy. Perhaps a business owner wants to give a bonus to an employee, but be able to have control of that bonus. The business may not get a tax deduction for this strategy immediately, but they may be entitled to a deduction in the future.

The benefits of Loan Regime Split Dollar, is that you are making a “Loan” to the Key Employee year-after-year. As the business owner, you still have full control over this benefit. Anything above and beyond the Loan is a benefit to the Employee. If you have wealthy Corporate Executive clients, Split-Dollar can be a great perk for helping those executives start off their estate planning.

At a point in history with such Low-Interest Rates, there hasn’t been a better time for Split Dollar!

Financial Advisors who are recommending Split-Dollar Life Insurance should seek competent and capable advisors to help advise them regarding appropriate actions and strategy.

If you have any questions, or would like more information, please contact your Brokerage Manager!

Are you making the most of split dollar? Are you familiar with split dollar?

What we are talking about in this segment is Loan-Based Private Financing -or- Intra-Family Loans for you marketers.

Split Dollar has been around for years and it’s been almost 10 years since we have had the final regulations put out on Split Dollar Planning.

Most advisors think Private Split Dollar and Private Financing is a strategy reserved for the Uber-Wealth High-Net-Worth Client that needs a way to finance their insurance needs without paying gift taxes, or paying limited gift taxes.

However, for the purpose of this article we are taking a different approach.

Our last piece that we wrote about was the Power of Term Conversions, and how over a 20 year period, Permanent Insurance for Moderate to High-Income earners is a better deal financially. I assist insurance agents and financial advisors on a daily basis with insurance planning, and show them and their clients asset repositioning strategies to pay for life insurance vs. an asset spendown.

Do you have wealthy clients with children with life insurance needs -or- clients with life insurance needs with wealthy parents?

Enter……..The Private Family Loan -or- Intra-Family Loan. In a nutshell, what we are showing is how a wealthy parent can assist their child with life insurance planning by loaning the premiums to purchase permanent life insurance, in turn for, interest due on the loan.

This strategy is not only less expensive for the child than purchasing term insurance, it has it’s benefits for both interested parties.

If you’d like to learn more, please contact your Brokerage Manager!

From time to time carriers announce Term Conversion campaigns from another carrier to their own carrier. Don’t forget, a lot of people sell term insurance year after year.

Are you taking advantage of these opportunities? Do you know how?

Many agents and financial professionals aren’t experienced with Term Conversions, and how to position a term conversion.

If you have clients with Term Policies and have a history of savings, these clients are a PRIME Opportunity.

For people with safe money savings – Permanent Insurance over 20 years is much more tax efficient than a 20 year term policy.

If you would like to learn more about how to position permanent insurance into your practice, ask your Brokerage Manage for a copy of our Whitepapers titled: “3 Steps to Selling More Permanent Insurance” and “Life Insurance as an Asset Class”.

Happy Selling!

Do you have access to charities, churches, or other 501(c)3 organizations? What if you could show them a way to jump start their charity? Some organizations have taken this concept and turned it into a marketing mechanism, but the principles and fundamentals behind the concept can still be used.

What if you could show a charity a to tap into their donors IRA assets NOW – and allow the donors to retain a fixed income back to their IRA?

How do we do this? The answer is Financial Arbitrage through a Self-Directed IRA.

Self-Directed IRA’s are permitted to makes loans to outside entities including charities. In turn, the charity repays interest on the loan annually with a balloon principal payment at death. The transaction is then collateralized by SPIAs and Life Insurance for the Loan.

Based on financial arbitrage, an excess surplus is created to benefit the Charity IMMEDIATELY!

Ex.:
Client: Mary Smith is 75/F

Mary Smith has $500k IRA – Client rolls over $100k to Self-Directed IRA

Self-Directed IRA invests in a note to a charity for $100k. At Long Term AFR of 4.3% – the debt service is $4300 annually. Life insurance annual premium is – $3264 annually.

Using a financial arbitrage of life insurance and SPIAs – the result is:

Of the 100k loan principal you take $33,521 + $44,128 and put into a SPIA. The $33,521 is for the insurance service payment, and the $44,128 is for the debt service payment back to the Self-Directed IRA.

Of the $100k – $77,649 is allocated to a SPIA to fund the debt service and life insurance premium. Leave’s the charity with an immediate charitable contribution of $22,351.

The client also has invested into an asset that is guaranteeing 4.3% to the IRA.

WIN-WIN-WIN Scenario

For any questions, please contact your BIP Brokerage Manager!

One of the least talked about highest impact services you can offer your clients is Beneficiary Planning – yet so few advisors offer these services.

Beneficiary Planning isn’t just talking about beneficiary designation on individual life insurance policies, but includes every asset! Retirement Accounts, Group Life Insurance provided by the Employer, Annuities, etc. – anything that requires you to post a beneficiary designation.

Of course, the ideal way for an individual or couple to handle this is to have a formal estate plan, preferably in a revocable living trust (with all of their assets titled in the name of the trust), but at least in a valid and up-to-date Will, and then to have all of these assets payable to the living trust or in some other consistent manner that makes sense and is efficient to carry out at death.

I suggest that all of you start by looking at your own individual situations. I’m willing to lay odds on the fact that very few of you will find that everything you own is set up the way you really want it to be, and that you need to bring many of your own beneficiary designations current with your current situation and desired dispositions at death.

Life is extremely fluid, and everyone’s family and business situation is constantly subject to change. It is essential, therefore, that everyone’s beneficiary designations on everything they own be kept current and up-to-date. As I said, I suggest you start with your own personal situation.

Then, to get 2011 off to a roaring start, systematically contact everyone you know – clients, friends, neighbors, your doctors and dentists, the professionals you deal with, the businesses you do business with, anyone you can think of – and offer them an absolutely invaluable service that nobody else has ever offered them: a through and impartial review of everything they own with a single purpose in mind, to make sure that everything will happen exactly as they wish when that ultimate last day of life arrives, be it tomorrow or many years down the road!

Ask your Brokerage Manager how you can roll-out a Beneficiary Review Program with your clients!