by Vince Dean Life Sales Consultant
In last month’s Case Consulting feature, we discussed a situation in which a client was looking for upside earning potential with no downside market risk for an asset he wanted to leave for loved ones. Given his particular situation, Creative Marketing helped identify an annuity that met his needs and gave him the flexibility he desired. However, it’s possible that similar needs for a different client would lend themselves to a life insurance conclusion. If you have clients who are uninsured or underinsured and are looking for tax-free savings potential, consider offering them the benefits afforded by life insurance. And just like many good things, they often come in threes.
- Male client, age 56
- Wife, age 54
- Changing jobs and building a new pension
- Looking for a tax-free legacy option
Take a taxable pension and turn it into tax-free income in the future. Additionally, create a solution that would allow the client to protect loved ones in case something unexpected might occur, provide supplemental retirement income and leave a legacy for the client’s heirs.
THE COURSE OF ACTION
At the end of the school year, the client was offered a new teaching position out of state. He and his wife determined that it was an opportunity they couldn’t pass up. The client then retired from his current teaching position in Texas, and the couple relocated to Oklahoma for the new job. After getting settled in and doing a thorough review of his new employee benefits, the client realized that he needed to do something about the pension he would receive from his Texas retirement so that he wouldn’t be taxed so heavily. He contacted his agent for help.
The agent and client sat down together to review all of the client’s assets and determine what the next steps should be. The agent used the “three bucket retirement” tax strategy to show the client which assets were: 1) taxable now, 2) tax deferred and 3) not ever going to be taxed1. After reviewing a number of tax-deferred vehicles the client already had, the agent suggested that the client take his taxable Texas teacher pension and turn it into a tax-free savings using a life insurance policy. The client agreed, and the agent contacted Creative Life to help evaluate the options available.
After completing a field underwriting questionnaire on the client and his spouse, we determined that a single life policy would be more appealing due to some outstanding health issues the client’s wife was facing. We then solved for the minimum face amount to maximize the policy’s cash accumulation within guidelines set by the IRS to keep this supplemental retirement income available to the client tax free. By selecting Aviva’s Lifetime Builder III IUL, the client would benefit from higher caps than other no-lapse guarantee products available. This product included three solid features: 1) guarantees, including a 2% minimum interest rate, Account Value Enhancement and Basic No-Lapse Guarantee; 2) choices, including seven interest crediting strategies, rider options, two loan options and three death benefit options; and 3) performance, with Aviva serving as a leading indexed life provider.
For the client: By turning a taxable asset into tax-free savings, the client felt comfortable knowing he and his wife would enjoy a wonderful set of benefits. The life policy would 1) protect the client’s spouse in case he were to pass away, 2) plan for a more enjoyable retirement through the policy’s cash accumulation and 3) prepare to counter potential taxes his wife would incur upon inheriting the death benefit by creating a tax-free, probate-free asset.
For the agent:
The agent was reminded of why he continues to partner with Creative Life, as he could always count on having immediate access to the 1) product knowledge, 3) resources and 3) tools that simplify business and speed up the placement process.
The next time you’re looking for good things to come, just give your Creative Life Sales Consultant a call.
FOR AGENT USE ONLY. NOT FOR USE WITH THE GENERAL PUBLIC. 12109 – 2011/12/19 | 18768 360201
1 According to current tax laws
Aviva Lifetime Builder III IUL [Policy Form 2ECG10] is issued by Aviva Life and Annuity Company, West Des Moines, IA. Product features, limitations and availability vary by state.
Guarantees provided by life insurance are subject to the financial strength of the issuing insurance company; not guaranteed by any bank or the FDIC. Agents may not give tax, legal, accounting or investment advice. Individuals should consult with a professional specializing in these areas regarding the applicability of this information to his/her situation.