Industry Innovation Is Maximizing The Versatility Of Life Insurance

In addition to modifying products and introducing new product riders to help address wealth management and estate planning concerns, insurance companies also are introducing more comprehensive services to help financial planners and clients. Some insurance companies, through trust company subsidiaries, now offer trust services to help financial advisors implement, manage, and maintain the clients wealth management and estate plan.

This is a tremendous opportunity because now financial planners have the ability to work with a corporate trustee to help implement a wealth management and estate plan. This ability provides the financial planner, attorney and client with an opportunity to work with the advanced sales department of the insurance company as well as trust company attorneys from design to implementation to administration of the plan.

By working together as a team with professionals familiar with the insurance products, as well as the trust services, the financial planner can coordinate a package of services and products to the client in an efficient and effective manner. It also helps the financial planner retain the clients business and helps develop a multigenerational client relationship to retain business. Such trust services can help implement life insurance by packaging life insurance trusts and generation skipping trusts. In addition, trust services also may promote more annuity sales.

For example, lets assume that Frank and Jane Mays are both in their 60s. Both have been married previously and have children from their prior marriages. Frank has an IRA worth $800,000. He would like to provide for Jane at his death but wants the remainder interest in his IRA to pass to his children from his first marriage.

Lets also assume that Frank would like to purchase an individual retirement annuity because of the death benefit features of the annuity. We can position the IRA as the funding vehicle, talk about minimum distributions and even provide information about using a trust as beneficiary. In this situation, we probably would talk about using a qualified terminable interest in property trust (QTIP) as beneficiary to help accomplish Franks objective. As always, clients should consult with their attorneys and tax advisors to implement this type of solution and to coordinate the solution with their overall plan.

Now, insurance companies, through trust company subsidiaries, can go one step furtherwhich allows the financial planner to go one step furtherand coordinate the QTIP solution to help implement and solidify the IRA planning with the annuity. In such a case, the trust can be named as beneficiary on the IRA and preserve the marital deduction election. At Franks death, the QTIP trust will pay income to Jane for her life with the remainder paying to Franks children from his first marriage.

Certainly, this may be accomplished even if the insurance company does not have a trust company subsidiary. But the process may be more efficiently and effectively packaged for the client and also more manageable for the financial planner if the insurance company does have a trust company subsidiary.

The overall fundamentals of wealth management remain constant. Clients need to accumulate, protect, preserve and transfer wealth. Insurance companies continue to improve products to serve multiple purposes. A long term care rider for life insurance is only one important example.

Financial planners should evaluate all product features and riders in light of the ability to help manage wealth. Insurance companies continue to provide more services to help financial advisors manage their clients wealth for this generation and the next. The introduction of trust services is only one important example.

These products and services are an ongoing innovation and increasingly are important for financial planners who need these types of products and services to help meet the growing demand for wealth management for this generation and the next.

Brett W. Berg, JD, LLM, CLU, ChFC, is director of advanced sales for Nationwide Financial in Columbus, Ohio. His e-mail address is [email protected].

Reproduced from National Underwriter Life & Health/Financial Services Edition, January 23, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.