Sleight of Hand?

June 24th, 2016 No comments

A love / hate relationship.  That’s basically how I describe my relationship with the life insurance industry.  One day I witness the unduplicable benefits of a well designed and astutely managed life insurance portfolio and the next I’m called in to salvage what I can of the most recent train wreck my advisor network has stumbled across.

In an industry which has struggled for years to gain a sense of trust and credibility, I get frustrated that it continues to shoot itself in the foot on a regular basis.  Here’s a quick example of something which isn’t new but is simply what came across my desk today. For full post, click here…

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Not an Expert on Life Insurance? Call One!

June 2nd, 2016 No comments

Through experience, an accountant relationship of mine has learned to pass just about anything related to life insurance by me when he sees any clients dealing with something.  Usually this is initially a simple phone call on a generic basis but sometimes includes shooting me documents with client information redacted.

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He had one older business owner who was in the process of selling out to other shareholders and a couple million of term insurance policy owned by the company was being transferred out to him.  His plan was to convert $500,000 and gift the policy to a charity.  He intended to let the remaining $1,500,000 lapse.

There is only one thing that should come to mind in a scenario like this: Life Settlement.  I had no idea if he would be interested but why would one ever choose to not pick up the phone to make a call to discuss? For full post, click here…

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StressTesting a Premium Financing Deal

May 10th, 2016 No comments

I have to admit I am sometimes cynical of the strategy du jour in the life insurance sales and marketing world. While the industry is incredibly innovative regarding ideas and strategies and brings amazing opportunity to many consumers, sometimes the original, sound idea is bastardized into something which bears little likeness to its namesake.

This is especially frustrating for those in the market who play on the straight & narrow, even those on the cutting edge who have their client’s best interests at heart. None-the-less, it is not difficult to understand the temptation to push an idea to its limits and to over market and even misposture what it is and can accomplish. For full post, click here…

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Life Insurance and Fidelity Charitable

April 14th, 2016 No comments

As is often the case, we learn the most when something goes wrong. Recently, I was working with an advisor who has a client with a foundation, or at least that is what we thought. The foundation is for all of the same purposes as most people who have a foundation; to further the goals of non-profit and charitable interests of the donor(s). For full post, click here…

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Success Story: “Shooting from the Hip” – Hit or Miss

April 5th, 2016 No comments

An attorney member of the Wealth Council posted a question on the list serve asking for referrals to a fee-based life insurance advisor.  Another member directed him to me and I ended up in an engagement with his client.

It turns out a woman in her eighties had recently lost her husband and someone had advised her and her family that the $1,500,000 of insurance in force on her life was “garbage” and they should get rid of it.

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Fortunately, the attorney recommended an independent analysis before any action was  taken.  It ended up that there were two policies, one for $500,000 and one for $1,000,000.  One was originally a survivor life policy.  The $500,000 policy was a well-funded Guaranteed UL policy with a highly rated and well respected carrier.  The $1,000,000 was with another decent carrier and was a current assumption UL contract which was modestly underfunded. For full post, click here…

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Success Story: The Importance of the “Second Opinion”

March 15th, 2016 No comments

After a presentation at Heckerling a few years ago, an attorney in the audience came up to me to introduce himself and let me know he may be calling me for help on a case.  A full year went by when he finally emailed me details of something he was working on.

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It turns out his client was the owner of a very successful global company and had a large existing life insurance portfolio.  The client and advisor was working with an agent who had a very long term and particularly close relationship to the family.

The reason the attorney brought me in was due to his skepticism regarding some work the agent was doing.  Something didn’t seem right but he couldn’t put his finger on it.  For full post, click here…

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Regulatory Changes re: Planning with Captives

March 11th, 2016 No comments

TOPIC: Has the PATH Act Muddied the Way for Planning with Small Captives?

MARKET TREND: The use of small captive insurance companies primarily for estate planning purposes may be a thing of the past.

SYNOPSIS: Captive insurance companies can allow businesses to obtain insurance protection against a wide variety of property and casualty (“P&C”) losses more affordabily and are taxed under many of the same rules applicable to traditional insurance companies. Internal Revenue Code (“Code”) § 831(b) provides small and mid-sized businesses with access to this important insurance market, encouraging these businesses to build up reserves that could protect against losses and thus support overall business longevity. However, the IRS had become concerned that the special tax rules under Code §831(b) were being used in “micro captive” arrangements primarily to accumulate wealth in these smaller captives for wealth transfer and estate planning purposes, not for insurance protection. The PATH Act attempts to both enhance the business benefits of small captives and address the perceived estate planning abuse by making two major changes to Code §831(b): (1) increasing the amount of premium income a captive can receive while still qualifying for Code §831(b) treatment, and (2) imposing two new tests, a risk diversification test and an ownership diversification test, one of which a captive must meet to qualify under Code § 831(b). These changes are effective for all existing and new small captives beginning in 2017 and after.

TAKE AWAYS: While the new diversification tests potentially limit the possible estate planning benefits attributable to small captive arrangements, 831(b) captives created primarily to provide P&C insurance coverage to businesses should not be greatly impacted. However, as there are no “grandfathering” provisions in the new legislation, non-compliant existing small captives must be restructured before 2017 to meet one of the required tests. Owners of these existing captives should contact their insurance and legal advisors now to review their current ownership structures for compliance. Owners of closely-held businesses have shown increasing interest in captive insurance arrangements and a way to reduce the costs of their P&C insurance and take advantage of certain tax rules applicable to small captive insurance companies. While the recent legislation has increased certain benefits with regard to small captives, it also may limit the ability of captive owners to use the captives for ancillary estate planning benefits.

For full post, click here…

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Are Life Settlements Back?

February 3rd, 2016 No comments

It’s been a while since I’ve discussed life settlements but, then again, it’s been a while since there has been a lot of activity in the market. The market wasn’t dead; it just seemed that way.

As a reminder, the life settlement industry is a secondary market for existing life insurance policies and it is an outgrowth of the vatical market. A viatical settlement is the sale to a third party of a life insurance policy on the life of a terminally ill individual, defined as someone with less than a 24 month life expectancy. Fundamentally, a life settlement is the sale of a life insurance policy to the secondary market on the life of an individual who isn’t terminally ill. For full post, click here…

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When Math Doesn’t Add Up

January 5th, 2016 No comments

Happy New Year!

I’d like to start out the year with a quick reminder of something I have discussed before. I am referring to how often we see and catch mistakes from home offices. I’m talking about legitimate, serious mistakes on behalf of carriers which few people would recognize, let alone know how to deal with if they thought something was up.

Most recently, I had a situation which incorporated multiple mistakes, each one unrelated to the other. I was introduced to a family to analyze a handful of policies in the irrevocable trust. Some of the policies where dramatically underperforming due to a significantly reduced dividend rate over the years and how that affected this particular policy design. In the end, it was decided to cash in a couple of the policies. For full post, click here…

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AG 49 – What Is It?

November 4th, 2015 No comments

Many of you are likely aware of recent regulations developed by the National Association of In-surance Commissioners (NAIC), in concert with insurance companies and consumer groups, which provide for more uniform and reasonable methods for calculating maximum illustrated rates on Indexed Universal Life (IUL) policies. For full post, click here…

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