After the turbulent times we've experienced in the financial markets in recent years, I'm guessing none of you have clients who believe they have sufficient, much less excess, retirement income potential.
The typical scenario involves disgruntled clients with depressed assets and extended retirement date projections. Not a very pretty scenario — and certainly one that keeps you answering questions like, "What do we do now? I'd like to retire someday!"
Current low yields on alternative places to put your clients' funds make it difficult to justify placing large portions of their assets in CDs, money market accounts or even Treasuries.
More importantly, if these same clients have insufficient life insurance coverage, their families and businesses are at even greater risk if their incomes were no longer there to carry the load.
Are your clients in need of the following?
- Protection for their family in the event of their "untimely demise"? (Query: When has anyone ever experienced a "timely" death?)
- An accumulation vehicle that grows on a tax-advantaged basis?
- The potential to access that accumulation vehicle (the cash value) when they want it, without government restrictions or red tape, using tax-free loans and withdrawals?
- An income tax-free benefit paid to the family in an amount generally greater than the value of the asset at death?
Sure, they probably have a qualified plan or 401(k), often the easiest way to save for retirement, but those also generate taxable income and have numerous restrictions on when and how much you must take out. They may also have annuities, which provide for tax-advantaged accumulation and can provide guaranteed lifetime income, but they are subject to government restrictions on when distributions can be taken without tax penalties. They may even have Roth IRAs, which provide outstanding tax benefits, but which also have contribution and income limits that make them unlikely to be a major factor in your clients' retirement success.
Control is the name of the game for the new consumer. They want to determine what they can take and when, without the government looking over their shoulder. Wouldn't it be helpful if there were a financial product that could protect their families, allow tax-deferred accumulation and create potentially tax-free income? Enter cash value life insurance.
Customize Side Benefits
While the primary purpose of life insurance is to provide a death benefit that protects families, there is no requirement that we turn our backs on the other unique tax advantages this product offers.
Where appropriate, the advanced sales staff at the companies you do business with can add an additional level of design to these situations, depending upon the circumstances of the individual case. For example, if asset protection is important to Dr. Smith, we can have her policy owned by a spousal lifetime access trust, giving her spouse access to the policy's cash value.
Another effective technique is to have a second-to-die policy owned by only one spouse, who is also the sole premium payer. Upon his death, the policy passes by contract into an irrevocable life insurance trust. This technique, known as a survivorship standby trust, keeps the proceeds out of the estate of the second spouse to die. Add to this the funding alternatives of executive bonus or split dollar, and you can see that each program can be custom designed to meet the needs to your particular client.
