Using Life Insurance to Enhance Wealth Transfer For Producer or Broker/Dealer Use Only. Not for...
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Transcript of Using Life Insurance to Enhance Wealth Transfer For Producer or Broker/Dealer Use Only. Not for...
Using Life Insurance to Enhance Wealth Transfer
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Agenda
• Consider MetLife for your next Leveraged Credit Shelter Trust client
• Case studies and action plan
• What is a Leveraged Credit Shelter Trust and how does it work?
• Identify potential clients and their concerns
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Identify Potential Clients & Concerns
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
• Widow or Widower
• Existing Credit Shelter Trust
• Age 50-85
• Doesn’t Need Trust Income
• OK with Resigning as Trustee
• Focused on Wealth Transfer
Do you Know this Client
• Insurable
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
I don’t need the income
The ConcernI don’t need the income from the Credit Shelter Trust, so how do I use those assets to increase the amount transferred to the trust’s remainder beneficiaries?
increase theamount transferred
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
The IssueThe Credit Shelter Trust (CST) is designed to transfer assets up to the deceased's lifetime exemption amount to non-spouse beneficiaries while still providing the surviving spouse with access to income from those assets, if needed.
transfer assets
access to income
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
The Leveraged Credit Shelter Trust
Strategy
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
What is a Leveraged Credit Shelter Trust?
A simple way for widows or widowers to utilize life insurance in their Credit Shelter Trusts to enhance the amount of wealth left to the beneficiaries.
life insurance
enhance wealth
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Potential solutions for decreasing trust income
• Municipal bonds
• Growth stocks
• Annuities
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
• Life insurance
– Income tax-free death benefit for trust beneficiaries
– Tax-deferred growth of policy cash value
– Potential for guarantees1
1All product guarantees are based on the claims-paying ability and financial strength of the issuing insurance company
Potential solutions for decreasing trust income
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Potential solutions For choosing the right funding option
Investment alternatives for trust assets
Cost of death benefit protection
Optional death benefit guarantees
Immediately leveraged wealth transfer
Step-up in basis (at death)
Tax-deferred accumulation
Wealth transfer tax-free2
Life InsuranceTraditional
Investments
YES YES
NO YES
NO YES3
NO YES
NO YES4
NO YES2 Subject to strict adherence to gift tax laws regarding annual exclusion gifts. Clients should seek advice from legal and tax advisors before any transfers are made to an irrevocable trust.3 While technically not a stepped up basis at death, life insurance death benefits are generally paid income tax-free under IRC Section 101(a).4 Only specific life insurance contracts offer guaranteed death benefits. Guarantees are based on the financial strength and claims paying ability of the issuing insurance company.
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Implementing the Strategy
Provide Client Personalized Illustration and Product Prospectus,
if Applicable5
1 Discuss Wealth Transfer Goals with Client
2 Inventory Current assets in both trusts
3 Evaluate Credit Shelter Trust Funding Options and Life Insurance Needs
4 Determine Premium Amount
6 Initiate Underwriting
Discuss wealth transfer goals with client
Client confers w/tax and legal counsel to ensure this technique is appropriate for the particular CST
Evaluate current trust assets, credit shelter trust funding options, life insurance needs and insurability
Determine premium amount
Provide personalized client illustration and product prospectus,
if applicable
Initiate underwriting
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Case Studies & Action Plan
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Case StudyAge: 68
Estate:$5m
CST:$1m funded with after-tax investments growing at 5%
3 Children: ages 50, 48 and 45
Risk Tolerance:Low
Goal: Increase wealth transfer to children with reduced risk
Meet Catherine*This example is hypothetical, actual results will vary.
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The cost of doing nothing…
Note: Assumes Catherine lives an additional 17 years.5% is based on an annual rate of return.For Illustrative Purposes Only. Actual Results will vary.
Current value of Credit Shelter Trust $1,000,000
Value of CST in 17 years (at 5% rate of return) $2,292,018
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Proposed strategyReposition half of trust assets to Guarantee Advantage Universal Life with Coverage Continuation Rider
Note: Assumes Catherine lives an additional 17 years.
$500,000 single pay GAUL policy $1,312,461
Remainder kept in current investments (assuming 5% annual ROR)
$1,146,009
Value of LCST with GAUL policy $2,458,470
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Compare the results
$166,452 additional wealth created
All product guarantees are based on the claims-paying ability and financial strength of the issuing insurance company.
Note: Assumes Catherine lives an additional 17 years.
Current trust assets $2,292,018
Reposition half of assets to GAUL $2,458,470
Amount of increased wealth transferred $166,452
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Benefits to your client• Retains unwanted income in the
trust • Income tax-free death benefit for
trust beneficiaries• Tax-deferred growth of policy cash
value• Potential for death benefit
guarantees5
5All product guarantees are based on the claims-paying ability and financial strength of the issuing insurance company
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Benefits to you• Introduces you to future generations
of your most successful clients
• Deepens client relationships
• Potential for new sales
• May uncover additional assets
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Determine Premium Amount and policy type•Provide Client Personalized Illustration and Product Prospectus, if Applicable
6
Determine whether trust can purchase life insurance on surviving spouse• Evaluate investment alternatives for trust
• Economics of life insurance purchased in the trust • Determine insurability of surviving spouse
• Spouse should resign as trustee
5
Inventory Current Assets in Both Trusts4
Schedule Time for Client Meetings2
Identify and Qualify Clients1
Initiate Underwriting7
3 Discuss Wealth Transfer Goals with Client and life insurance needs
Determine whether trust can purchase life insurance on surviving spouse• Evaluate investment alternatives for trust
• Economics of life insurance purchased in the trust • Determine insurability of surviving spouse
• Spouse should resign as trustee and cannot have a power of appointment over the trust• Client to confer w/independent tax and legal counsel to ensure technique is appropriate in their particular circumstances
Initiate underwriting
Identify and qualify clients
Schedule time for client meetings
Discuss wealth transfer goals with client and life insurance needs
Inventory current assets in both trusts
Determine premium amount and policy type•Provide client personalized illustration and product prospectus, if applicable
Action plan
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
MetLife Brand• One of America’s largest financial
companies with roots as far back as 1863• Serves over 90 of the top one hundred
FORTUNE 500® companies6
• Recognized as the Nation’s Largest Life Insurer7
6MetLife. Quick Facts: Full Year 20097Based on life insurance in-force as of December 31, 2008.
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Important InformationPursuant to IRS Circular 230, MetLife is providing you with the following notification: The information contained in this document is not intended to (and cannot) be used by anyone to avoid IRS penalties. This document supports the promotion and marketing of insurance products. You should seek advice based on your particular circumstances from an independent tax advisor.
MetLife, its agents, and representatives may not give legal or tax advice. Any discussion of taxes herein or related to this document is for general information purposes only and does not purport to be complete or cover every situation. Tax law is subject to interpretation and legislative change. Tax results and the appropriateness of any product for any specific taxpayer may vary depending on the facts and circumstances. You should consult with and rely on your own independent legal and tax advisors regarding your particular set of facts and circumstances.
Prospectuses for Equity Advantage Variable Universal Life, and for the investment portfolios offered thereunder, are available from MetLife. The policy prospectus contains information about the policies features, risks, charges and expenses. Investors should consider the investment objectives, contract features, risks, charges and expenses of the investment company carefully before investing. The investment objectives, risks and policies of the investment options, as well as other information about the investment options, are described in their respective prospectuses. Clients should read the prospectuses and consider this information carefully before investing. Product availability and features may vary by state.
MetLife life insurance policies have limitations, exclusions, charges, termination provisions and terms for keeping them in force. There is no guarantee that any of the variable investment options in this product will meet its stated goals or objectives. The cash value is subject to market fluctuations so that, when withdrawn, it may be worth more or less than its original value. Guarantees are based on the claims paying ability and financial strength of the issuing insurance company.
MetLife, its agents and representatives may not give legal or tax advice. Any discussion of taxes herein or related to this document is for general information purposes only and does not purport to be complete or cover every situation. Tax law is subject to interpretation and legislative change. Tax results and the appropriateness of any product for any specific taxpayer may vary depending on the facts and circumstances. You should consult with and rely on your own independent legal and tax advisors regarding your particular set of facts and circumstances.
Life insurance products are issued by MetLife Investors USA Insurance Company, Irvine, CA, Metropolitan Life Insurance Company, New York, NY, and in New York only by First MetLife Investors Insurance Company, New York, NY. All guarantees are based on the claims-paying ability and financial strength of the issuing insurance company. Variable products are distributed by MetLife Investors Distribution Company, Irvine, CA. All are MetLife companies. February 2011
Insurance Products are:• Not A Deposit • Not FDIC-Insured • Not Insured By Any Federal Government Agency
• Not Guaranteed By Any Bank Or Credit Union • May Go Down In Value
BDVL21444 L0211161351[1212] © 2011 METLIFE, INC PEANUTS © 2011 Peanuts Worldwide