Executive Capital Resources

05/05/2023

INDUSTRY, TAX AND MARKETING NEWS

DEJA VU, ALL OVER AGAIN – The United States’ legislative and executive branches are back to playing their periodic game of chicken in regard to the national debt. When, where and how this will end is anyone’s guess at this point. Treasury Secretary Janet Yellen is warning of the possible consequences if the debt limit is not increased.

MORE BANK JITTERS – First Republic Bank reported a more than $100 billion plunge in deposits in its first quarter and its shares on April 25 fell to a record low, closing down nearly 50%. Options are being explored. Meanwhile, ripple effects are being felt by other banks. Options for stabilizing First Republic appear limited unless the government steps in, which appears to be happening.

RED REPORT – A newly-released Fed report on the March collapse of Silicon Valley Bank placed the blame on both the bank’s managers and on the central bank’s regulators, i.e., mismanagement and supervisory failures. Social media frenzy played a role as well.

FREE PREVENTATIVE SERVICES TO CONTINUE – U.S. District Judge Reed O’Connor at one time declared the entire Affordable Care Act unconstitutional. Since that didn’t work out, he’s now chipping away, imposing a nationwide injunction on an ACA requirement that health insurance must cover preventive services for free. A letter to Democratic lawmakers from leading health insurers and industry organizations said, however, that most U.S. health insurers plan to continue offering free preventive health services while that ruling is appealed.

NEW REG BI GUIDANCE – The SEC has released new guidance for advisors and brokers on meeting their care obligations when providing investment advice and recommendations to retail investors. The guidance does not create new regulation or rewrite existing ones. This third bulletin on Reg BI focuses on the Care Obligation of Regulation Best Interest for brokers and the duty of care enforced under the Investment Advisors Act of 1940 for investment advisors. Here’s one industry professional who thinks the new SEC Reg BI guidance is spectacular.

FEDERAL WATCHDOG - The FSOC (Financial Stability Oversight Council) is the federal agency charged with keeping the U.S. financial system upright. The agency wants to extend its ability to keep problems at nonbank financial companies from destroying the economy. By nonbank financial companies, think life insurance companies, money market funds and cryptocurrency firms.

NOTICE OF APPEAL - A recent Florida federal court decision struck down the DOL’s guidance that rollover advice is fiduciary advice. As expected, DOL has filed a notice of appeal. This leaves broker-dealers, investment advisors and insurance agents between a rock and a hard place while the appeal takes place. If they do not continue to satisfy DOL requirements and DOL wins the appeal, any rollovers they recommended will be prohibited transactions.

RISK ALERT - The SEC issued a risk alert warning broker-dealers and advisors that some branch offices lack policies for protecting client records.

HOISTED ON ITS OWN PETARD – In Shakespeare’s Hamlet, a bomb-maker is blown (“hoisted”) off the ground by his own bomb (“petard”)...poetic justice served. In the case of Schwab, it too may be in the process of being hoisted by a petard of its own making. In this case, the “bomb” is the zero-fee landscape it created when it slashed trading commissions to zero in 2019, assuming that its bank would keep driving profits. It worked for several years when interest rates were near historic lows. The March collapse of three banks has presented Schwab with fresh risks.

KILLING IT – A Vanguard study finds that “Gen Z is killing it when it comes to 401(k) savings.” Gen Z comprises those individuals born between 1995 and 2010. Reasons given are automatic enrollment and the rise of target-date funds.

ANNUITIES AND TAXES – If you sell annuities, it’s important that you thoroughly understand how these products are taxed. Here’s a primer to help you brush up on annuity taxation.

RIGHT TIME FOR AN ANNUITY? – Schwab thinks so. With payout rates for guaranteed lifetime annuities at their highest levels in over a decade, now may be the perfect time for clients to consider an annuity.

BY THE NUMBERS – This issue’s “numbered” articles:
Can Your Clients Answer the ‘Big 3’ Financial Literacy Questions?
Where to Park 3 Types of Client Cash
4 Ways to Show Prospects Your Unique Value
Retirement disruptors: 4 key trends that will change the industry landscape by 2030
6 ways to get a foot in the door at a prospect company
8 Keys to Defusing Couples’ Money Conflicts
8 Reasons to Avoid a Roth Conversion
9 Questions Clients Are Asking About Bank Failures, Deposit Insurance
10 Trends Shaping the Wealth Management Industry
10 Assumptions That Can Lead to Financial Ruin
The Ten Commandments of Getting More Clients
12 Worst States for Deaths in Q1
12 Top Medicare Bills in Congress Now
14 Best Value Public Colleges

11/28/2022

11/01/2022

Our friend, David Fenn is part of Electronic Processing of North America. A female owned business with an expertise in the merchant processing industry. They provide customers of all sizes across industries with merchant processing and consulting services. They have over 75 years of experience.

Why It Matters

Electronic Processing of North America is the preferred partner of financial institutions, hospitality, professional associations, and a myriad of business firms.

They consult wit private and public entities, evaluating processing bids, auditing contract compliance, exploring system integrations, and implementing new processing solutions.

Their clients are positioned to access the best processing services in the marketplace.

Let us make an intro..
Thank you.
Jeffrey S. Adler, CLU
[email protected]
847 673 2677

10/06/2022

We want to introduce a new too of value. Our term insurance pricing tool allows you to anonymously review the cost and benefit of term insurance. This can provide a base for you when having a discussion or consult. Please take the time and look it over. Hoping it provides much help.

www.integrity4life.com/ecr

Eventually every business owner will leave the business that he or she created… either by selling the business or as a result of death, disability or retirement. As a result, business continuation planning is about taking control of something that is inevitable. The first step in business continuation planning is to clearly define your goals. For example: What do I want for my future? Do I want to work indefinitely, or do I want a clearly defined exit strategy? What do I want for my family? Do I want my business to remain in the family? What steps have I taken to secure my family's financial well-being in the event something happens to me? What do I want for my business? What would happen to my business if I died or became disabled? Do I want my business to survive my death, disability or retirement? In answering these questions, you have three options to evaluate: retain the business in your family, sell the business to co-owners, employees or to outsiders or, as a last alternative, liquidate the business. Without advance planning, others may control the process. With advance planning, a business owner has the opportunity to realize the maximum value of the business, develop an appropriate tax strategy, leave the business in the hands of chosen successors and avoid the family and business turmoil that can result from a lack of planning.

"Sell a customer what they Want, Deliver what they Need." -- Rick Beneteau "

Satisfied customers are apathetic. Loyal customers will be your advocate." -- Jeffrey Gitomer "

You have to have your heart in the business and the business in your heart." -- Thomas J. Watson, Jr. "

The creation of value is the only and everlasting source of profits." -- Denis Waitley Ralph

Waldo Emerson wrote a poem on success. One of his measures of success in that poem was to, 'Leave the world a bit better.' That line has always stuck in my head. Emerson said you have succeeded if you leave the world a bit better. I have made that line part of my life philosophy. When the tide goes out there is a watermark where the water was. When the waters of life recede from the shore of my being and my heart pumps for the last time, my desire is that there will be a mark where I stood. My aim is that the mark will say, 'For some decades a man occupied this space who saw others more important than himself and efforted to leave the world a better place for them and those yet to come.'

Just click and answer a few questions...

09/22/2022

Did you know that there are approximately 38 million life insurance policies owned by Seniors with total death benefit in excess of $3 Trillion?

As of today, nearly 88% of all universal life insurance and 85% of all term life policies never result in a death claim.

Consistent service is partly to fault. What if used these policies for charitable purposes, what could we do:

Name a charitable recipient as beneficiary.
Buy a new life insurance policy and donate to a charity.

Give a "paid up" life insurance to a charity; changing the owner and beneficiary.

Give an existing policy where the donor is still paying premiums to a charity.

Buy a life insurance that benefits the donors heirs to replace money or other assets donated to a charity. This is called wealth replacement.

Purchase a life insurance on the life of a child, spouse and/or partner tor the benefit of a charity.

Use cash and a life insurance policy as an opportunity to name something important such as a classroom or new building.

Help fund an endowment that generates an ongoing stream of income.

Provide an upfront planned gift of life insurance.

Give a policy to a charity that manages many life insurance policies that provides income streams to several charities..

09/08/2022

INDUSTRY, TAX AND MARKETING NEWS

INFLATION AND THE FED – In a blunt and forceful speech given at the annual Jackson Hole Economic Symposium, Fed chair Jerome Powell said that inflation is still too high and that controlling inflation would cause “some pain” for households and businesses. Mr. Powell also warned that, as the Fed continues its rate hikes, a softer labor market was “very likely.” He went on to say that “a failure to restore price stability would mean far greater pain.” The Fed has raised interest rates four times this year and more increases are expected at meetings in September, November and December.

STUDENT LOAN FORGIVENESS – President Biden announced a plan to forgive up to $10,000 in federal student loan debt for borrowers with incomes less than $125,000 if single/$250,000 if married. Recipients of Pell Grants, which are available to low-income undergraduates, will see up to $20,000 of debt canceled. The income used in seeking debt relief can be either 2020 or 2021 income. The Department of Education will develop “a simple application process for borrowers to claim relief,” expected to be available by the end of 2022. Finally, the moratorium on repayment of federal student loans and interest has been extended yet again, from August 31 to December 31, 2022, the seventh extension since the Covid-19 pandemic began in March 2020. Click here for more insight on how this may impact your clients. In other student loan news, the Biden administration has canceled $3.9 billion in student debt for 208,000 borrowers defrauded by ITT Technical Institute and $1.5 billion in debt for borrowers who attended Westwood College.

THE IRS – The Internal Revenue Service is receiving an influx of $80 billion in enforcement funding over the next 10 years. Treasury Secretary Janet Yellen has given the IRS a six-month timeframe in which to develop a plan for the funding. Priorities are likely to be systems modernization, clearing a backlog of tax returns, boosting services for taxpayers and “training employees so they can identify the most complex evasion schemes by those at the top.” This article suggests that, rather than sending the IRS more money to do its job, it might be better to simplify the tax code...”The IRS struggles to administer the system because U.S. taxes are insanely complicated.” In other news, we’ve learned that a kinder, gentler IRS will wipe away $1.2B in late fees for taxpayers who struggled to file their returns during the pandemic.

MAKING A RECOMMENDATION – In its Strategic Plan for 2022-2026, the SEC states that it intends to shift its enforcement focus for Regulation Best Interest to “making a recommendation.” In other words, where retail investors’ funds are actually placed will be scrutinized.

DON'T HOLD YOUR BREATH – Anyone expecting price relief as a result of the Center for Medicare and Medicaid Services (CMS) being given the right to negotiate Medicare drug prices shouldn’t get their hopes up too high. First of all, this doesn’t even begin until 2026 when prices for 10 brand name drugs or biologics without generic or biosimilar equivalents can be negotiated. That increases to 15 Part D drugs in 2027, 15 Part B or Part D drugs in 2028, and 20 Part B or Part D drugs in 2029 and later years. Big Pharma went all in to kill the drug negotiation provisions, so don’t expect them to “go gently into the night”...the pharmaceutical industry is likely to challenge the law in the courts.

HEALTH CARE COSTS - While less than the current inflation rate, employer-paid health care costs are expected to increase by 6.5% next year, to more than $13,800 per employee. In related health-care cost news, as Covid-19 becomes more of an endemic disease like the flu, the Biden administration is preparing to transition the costs of Covid-19 vaccines and treatments to insurers and patients.

U.S. LIFE EXPECTANCY - U.S. life expectancy over the past two years has taken the biggest decline in almost 100 years. The primary cause is the Covid-19 pandemic, but increases in deaths from overdoses and accidents have also taken a toll on life expectancy.

HELP WANTED - According to Fidelity Investments, nearly half of 401(k) sponsors are looking for new advisors who bring more expertise to the job.

RECORD-BREAKING SECOND QUARTER – LIMRA reports that fixed-rate deferred annuity sales resulted in a record-breaking second quarter. “All fixed products showed positive growth as consumers looked for safety from the volatile equity markets.”

NATIONAL 401(k) DAY – September 7 has been designated National 401(k) day by the Plan Sponsor Council of America, which is offering free tools and materials to help educate employees. In this same vein, NAIFA is launching an Employee & Executive Benefits Center to help its members who help employers with benefits arrangements.

BEWARE THE "FINFLUENCER" – Finfluencers are social media celebrities who offer financial advice to their followers, some even being secretly paid to promote certain investments. They are not bound by the same regulations as financial advisors and there is little to force them to disclose who is paying them. Their target tends to be younger investors who get their information from social media. This article is eye opening.

SHUTTING DOWN – Amazon has a deal to buy the One Medical chain of clinics, resulting in a sudden move to close its primary care and telehealth service, Amazon Cares, at the end of this year.

LTCI PROBLEMS – John Hancock is paying a total of $26.3M in penalties and extra benefits in New York as a result of miscalculating long-term care insurance benefit termination dates. Over at Prudential, a disgruntled LTCI policyholder is suing over the implementation of a 78% hike in costs over three years, more than doubling his premium from 2017.

TOP EXPENSES – Not surprisingly, housing and health care top the list of expenses for retirees. In 2020, the average American over age 65 spent $47,579 annually on living expenses, with more than $17,000 of that going for housing and health care claiming another $6,600.

SOCIAL SECURITY DISABILITY – If you need to update your understanding of Social Security Disability Insurance (SSDI), click here for answers to some of the most common SSDI questions.

PONZI CROOK – The leader of a $310M Ponzi scheme has been sentenced to 10 years in prison and to forfeit $297M. Most of the victims were veterans and retirees. Unfortunately, he had help...he worked “through a network of hundreds of financial advisors and insurance agents across the U.S.”

BY THE NUMBERS – This issue’s “numbered” articles:
4 Bear-Market Tips from Advisors – and Client Reactions
5 Steps to Building a Retirement Income Plan for Clients
5 States Where Older Adults’ Life Expectancy Dropped the Most in 2020
5 Reasons Affluent Clients Might Need Long-Term Care Insurance
6 Investment Picks for Taxable Accounts
7 Top Trends in Retirement Planning Now
7 Key Medicare Dates in the New Climate and Health Law
7 Reasons New York’s $26M John Hancock LTCI Action Matters for Advisors
8 Soft Skills Advisors Need to Master
10 Reasons to Call Clients before Labor Day
15 Simple Questions That Build Bonds with Prospects

07/12/2022

INDUSTRY, TAX AND MARKETING NEWS

"STRONGLY COMMITTED" – In its June meeting, the Federal Reserve hiked interest rates 75 basis points, the largest increase since 1994, and indicated it might make a similar increase in July. In Congressional testimony, Fed Chairman Jerome Powell said that the Fed is “strongly committed” to bringing down inflation and has the monetary tools to do so. Powell admitted that achieving a “soft landing,” in which monetary policy tightens without creating severe economic conditions is a challenge. He conceded that a recession remains a possibility.
INFLATION MEASURES – There are several different measures of inflation. The May core personal consumption expenditures measure, closely watched by the Fed, rose 4.7% from a year ago, slightly less than the previous month. The consumer price index, more closely watched by the public, rose 8.6% in May, the highest it’s been since late 1981.

ACRONYM HEAVEN - The Senate is on an acronym roll. Not only has the Rise & Shine Act (Retirement Improvement and Savings Enhancement to Supplement Healthy Investments for the Net Egg) advanced, but it’s been joined by the EARN Act (Enhancing American Retirement Now Act). Rise & Shine and EARN will be combined to form the Senate’s version of a Secure Act 2.0 package. There are differences between the House and Senate versions of SECURE 2.0.
FIRST REG BI ACTION – The sale of unrated, high-risk debt securities known as L Bonds to retirees and other retail investors has earned a registered broker-dealer and five of its registered reps the SEC’s first Regulation Best Interest enforcement action.

SEE YOU IN DECEMBER – At this point it looks like the Labor Department won’t reveal its new fiduciary rule until December. That’s the point at which the proposed rule would be sent to the Office of Management and Budget for review.
GAMIFICATION OF INVESTING – The SEC is planning to propose new rules to crack down on “digital engagement practices” used by some online stock brokerages and investment advisors. The concern is that the game-like features, referred to by critics as the gamification of investing, are putting investors at risk by encouraging excessive trading.

STANDING NAKED - According to this opinion piece, “The entire (health care) industry is going to have to stand naked in front of every patient and consumer and display just how bad the rip-off has been.” The author further states that “the largest transfer of wealth has taken place in this country due to the enormous bloat and inefficiencies in our health care system.” According to the author, “sunshine is the best disinfectant” and that sunshine will be delivered through the requirements that hospitals and pharmacy companies publish their negotiated rate schedules. It’s hard not to agree with this analysis when you learn that 100 million people in the U.S. are saddled with health care debt...”6 in 10 working age adults with coverage have gone into debt getting care in the past five years, a rate only slightly lower than the uninsured.” Some sunshine may be on the way in the form of a Federal Trade Commission inquiry into the business practices of the six largest pharmacy benefit managers (PBMs).
BANK STRESS TESTS - U.S. banks aced the Fed’s annual stress test of their ability to withstand market turmoil. This determination paves the way for Wall Street’s biggest banks to return tens of billions of dollars to investors in the form of dividends and share buybacks.

MORTALITY GAP - Turns out that the political divide isn’t the only thing separating Americans...there is a mortality gap as well. In 2019, Democratic-voting counties had an overall 15% lower death rate than Republican counties, up from a 3% difference in 2001. The study doesn’t include any mortality data from the pandemic which, if anything, could widen the divide.
PAYCHECK TO PAYCHECK – This recent report is rather stunning...”Among Americans earning $250,000 or more, 30% were living paycheck to paycheck as of May.” Maybe those folks need to think about heading to Luckenbach, Texas and getting back to the basics with Willie and Waylon and the boys.

HANDY CHECKLIST - After marriage, people saving in an IRA may be exposed to both new restrictions and new opportunities. This checklist details both and how to deal with them.
GIVETH AND TAKETH AWAY - Current HSA rules do not allow someone working past age 65 and on Medicare to continue contributing to an HSA. On the other hand, current Medicare beneficiaries can use HSA funds to pay Medicare premiums and can withdraw funds from their HSAs for non-medical uses without paying a penalty. A current bill in front of the House would flip these scenarios. Medicare beneficiaries could continue to contribute to an HSA, but could not use HSA funds to pay Medicare premiums or make penalty-free withdrawals for non-medical uses. Not sure how that trade off would play out.

ARE YOU READY? - The Labor Department’s new fiduciary prohibited transaction exemption (PTE) takes effect on July 1, requiring that advisors and broker-dealers provide to the participant in writing why a rollover is in their best interest. More on the PTE here. The new PTE may present “a significant opportunity to stand out in the marketplace, build trust and manage clients’ retirement wealth more holistically.”
PRACTICAL ADVICE - Here is some practical advice for dealing with the DOL’s new IRA rollover requirements, including how to qualify for an exemption under the rules and ease the burden of building compliance processes.

GREATER FOOL THEORY - The greater fool theory argues that prices go up because people are able to sell overpriced securities to a “greater fool,” whether or not the assets are overvalued. None other than Bill Gates feels that cryptocurrencies and NFTs are “100% based on greater fool theory.”
ANOTHER INVESTMENT OPPORTUNITY - Here is information on another opportunity...investing in the metaverse. There doesn’t seem to be agreement on what the metaverse is, beyond the next iteration of the internet. Another explanation is that it is an online, virtual version of the physical world we currently live in. Regardless of what it actually is, there apparently are numerous opportunities to invest in the metaverse, including in virtual real estate.

CASH WINDFALLS - Most of us have known or heard of someone coming into a cash windfall and has difficulty navigating their new wealth. This article can help you help clients navigate the hurdles of cash windfalls.
WAKE-UP CALL - Starting soon, 401(k) statements will include “lifetime income illustrations,” which estimate the monthly income that can be generated by a lump sum of money. For many Americans this may prove to be a wake-up call that they need to save more.

WRONG DIRECTION - It’s a mess, our system for managing long-term care risk that is...”What we have is a poorly functioning private insurance market, fast rising cost of care and a general state of denial about the potential financial risk of a serious long-term care need.” Learn more here about the potential financial risks and possible ways to manage them.
DIALYSIS COVERAGE - In a recent case, the Supreme Court sided with a group health plan over a dialysis provider. The plan covers dialysis providers only as out of network and reimburses them at a lower rate. In its opinion, the Supreme Court held that while the plan pays lower reimbursement rates for dialysis than for other treatments, this does not discriminate against patients with end-stage renal disease because the same lower level of coverage is offered to all patients with kidney disease.

BY THE NUMBERS – This issue’s “numbered” articles:
3 Scenarios That Could Trigger a U.S. Recession
3 Reasons the Market’s ‘So Bad It Is Good’
5 Ways the New Stock Market Rollercoaster Could Affect Life Insurers
5 Steps for Advising Retired Clients in a Down Market
5 Rules the SEC Plans to Review This Year
5 Predictions for the Future of Fiduciary Advice
5 Ways Life Insurance Can Boost Clients’ Retirement Plans
9 signs a client relationship is in danger
10 Estate Planning Steps Wealthy Investors Might Be Missing
10 Ways to Find Business This Summer

05/05/2022

INDUSTRY, TAX AND MARKETING NEWS

INFLATION – Inflation rose to 8.5% in March from a year ago, a 40-year record. This resulted in the Senior Citizens League estimating that the 2023 Social Security cost-of-living adjustment could be 8.9%.

CLEAVER– Fed officials have “generally agreed” to take a cleaver to the central bank’s asset holdings, cutting up to $95 billion a month in another effort to fight inflation. There also appears to be a sentiment to “expeditiously” push the target policy rate in half-percentage-point-increments to around 2.4%.

U.S. MORTALITY - According to this article, “all-cause U.S. mortality was up 29% in early 2022.” In the first eight weeks of this year, 21% of the people who died had COVID at the time of death. The total number of deaths from all causes increased by 29%.

SEC WARNINGS – The SEC is warning BDs and advisors to be cautious when recommending rollovers out of a retirement plan so as not to run afoul of their fiduciary responsibilities. You can find additional information in the newly-released SEC guidance bulletin, as well as in this article. The SEC is also cracking down on revenue sharing arrangements, including 12b-1 fees, payment for shelf space and cash sweep arrangements. The concerns are conflicts of interest and harm to investors.

EFFECTIVE NOW – The proposed IRS regulations on how to handle required minimum distributions under the Secure Act of 2019 are proposed no longer. They are now in effect. This article provides good advice on how to proceed.

COMMISSION CUT – Apparently people who sign up for ACA coverage outside of the end-of-year enrollment window tend to be sicker, costing insurers more. In an attempt to limit special enrollment growth, some insurers are cutting commissions to brokers who sell the coverage. The action has caught the attention of federal regulators.

STUDENT LOANS - The student loan payment pause, scheduled to end on May 1, has been extended until August 31 by the Biden administration.

EASING MEDICAL DEBT - The White House has rolled out a plan to ease the burden of medical debt. This includes not considering medical debt when determining eligibility for loans, as well as making it easier for veterans to have health care bills forgiven.

RETIREMENT EARNINGS TEST - In advising clients about retirement, it’s important to understand the Social Security retirement earnings test and the impact it can have on clients who retire before reaching their full retirement age. This article can help.

BOOMING SALES – 2021 annuity sales were the highest seen since 2008, increasing 12.3% over 2020 sales ($207.5 billion to $261.5 billion).

1035 EXCHANGES - Circumstances can arise when a client may want to change from existing life insurance or annuity contracts to new contracts. While they can sell or surrender their existing policies, this may have income tax implications. A 1035 exchange may facilitate changing to new contracts without those income tax implications. Click here to learn more about the 1035 exchange rules.

NEED AN ANNUITY? - With the demand for guaranteed income rising, the question arises of whether a client needs an annuity and, if an annuity appears to be appropriate, what kind of annuity should be purchased and how much should be invested in an annuity. This article has a formula that can help answer these questions.

COST OF HYBRID COVERAGE - The American Association for Long-Term Care Insurance (AALTCI) has launched a “linked-benefit long-term care insurance price index survey program” to find out what life-LTC hybrid coverage really costs.

BY THE NUMBERS – This issue’s “numbered” articles:
3 Stretch IRA Alternatives After IRS’ Secure Act Surprise
3 Tax Plans in Play in Congress Now
3 Ways Home Equity Can Fill Savings Gaps
4 Ways to Help Clients Maximize Their Charitable Impact
5 Biggest Retirement Planning Regrets of Older Workers, Retirees
5 Tips for Successfully Passing Down Wealth
6 Critical Themes for the New Global Economy
7 Economic Predictions for a Volatile Future
7 Tax Refund Myths, Debunked: IRS
8 Steps to Helping Clients Spend Their Retirement Assets
9 U.S. Health Spending Projections We All Should Know
10 Ways IRS’ Secure Act Regs Affect Planning, RMDs
Cheat Sheet: 10 Social Security Facts Every Advisor and Client Should Know
10 Ways Advisors Blow Themselves Up at Nonprofits
13 Tips for Getting More Clients
16 Robo-Advisors Ranked from Worst to Best

04/27/2022

UNBURY YOUR LIFE INSURANCE: THE 2017 TAX ACT

JEFFREY S. ADLER, CLU AND JAY M. JAFFE, FSA, MAAA

If you’re still paying premiums for an old life insurance policy you started many years ago and it is now buried somewhere in your desk, the new Tax Cuts and Jobs Act of 2017 is a good reason for you to find that policy and have it reappraised. It may be worth much more than you imagine.
Did you know that you can now sell life insurance policies? Some of the reasons you might want to consider selling include:

· My business life insurance is no longer needed --- “I’m selling the paper”
· My need for personal life insurance has disappeared --- “the kids are now adults”
· I’m concerned that I might outlive my assets --- “we didn’t save enough”
· The premiums are too high or about to increase --- “I’m getting older”
· Health insurance has become a financial burden --- “our health care costs are soaring”
· My debt service payments are too high --- “we are wasting our money paying interest”
There is now an active market for purchasing life insurance policies. The sale of a life insurance policy to a third party is generally referred to as a “Life Settlement” and means selling an existing life insurance policy to an independent third party for more than its cash surrender value, but less than its net death benefit.

The proceeds from a Life Settlement transaction can provide cash and enable you to better assign your investment to retirement savings, health insurance or some other use that has been underfunded or even totally ignored because of other financial responsibilities.
A Life Settlement will be financially more attractive when one or more of the following conditions are present:

· A medical condition that will require large future health care related costs;
· At least age 50+;
· A clear lack of need to continue the life insurance;
· A policy that is at least 2 years since issue;
· A term life insurance policy with premiums that are scheduled to increase substantially; and
· A need for cash to fund a retirement account, reduce debt, pay medical costs, etc.

If you find yourself answering “yes” to any of these situations, it is appropriate to explore with a professional Life Settlements insurance broker whether selling a life insurance policy makes sense. These specialists will help you understand your alternatives and if selling your policy is in your interest, they will find the right third party buyer for your policy.

While a Life Settlement specialist will provide you with a list of the information needed in order to process your Life Settlement request, try to have as much of the following in front of you when you start the conversation with a Life Settlements broker:

a) The life insurance policy you are considering selling;
b) The policy’s most recent annual statement;
c) Your medical history including prescription medications; and
d) Personal physician contact information

When you’re chatting with the Life settlements broker, be sure to ask for a comparison between your current policy and the newer types of life insurance now being offered. You may decide to “trade in your existing life insurance for a new model” once you see what’s included in new life insurance policies.

Today’s life insurance policies provide benefits not just at your death but also while you’re alive. For example, some life insurance policies pay benefits if you are confined in a nursing home and may replace and/or reduce the need for long-term care insurance (LTC). Another new life insurance benefit pays cash when a specified critical or a terminal illness occurs --- which is often just the time when an insured needs extra funds for medical bills or to replace lost income.

Prior to the 2017 Tax Act a seller of a life insurance policy may have been treated differently as compared to an individual who surrenders an unneeded life insurance policy back to the insurance company. The 2017 Tax Act not only eliminates all concerns about the tax formula for a Life Settlement transaction but the Act’s specified method probably results in a lower tax liability than under prior rules. Having a knowledgeable Life Settlements broker involved in the sale of your life insurance policy will mean that come April you will have all the data you need to complete your tax return properly and easily.

To recap, selling a life insurance policy is referred to as a Life Settlement transaction. There are now three current incentives for selling and/or updating your life insurance policies:

1. Any concern about how the transaction will be taxed has been eliminated;

2. The increased estate tax exemption in the Tax Act may have made your life insurance unnecessary; and

3. Your policy may be out-of-date and lacking the living benefits now included in life insurance policies.

Why continue to pay life insurance premiums if you don’t need the life insurance? By reappraising your current life insurance policies, you may wind up with a new life insurance policy that automatically includes living as well as death benefits. And, if you’ve elected a Life Settlement, it will provide cash to use for other purposes.