Using separate GA's for each product line?  You may want to re-think that!

This week we talk about a real case.  Here are the broad strokes:

• Couple in their 60's
• Completing their Estate Plan that includes both Long Term Care and Life Insurance
• The Life Insurance will be funded via annual exclusion gifts
• 2010 gifting had already been exhausted, so the attorney recommended delaying the placement of the life insurance until January 2011

This seems simple enough, right?  Well, maybe not.  Turns out the male of the couple was declined for LTC based on his medical history, specifically the occlusion of a carotid artery.  Ironically, the life carrier did not have an issue with this, and is ready to move forward on a standard basis.

So where does the whole "watching your back" thing come in to play?  Well, the proposed insured was planning to go to his physician to try and address the decline by the LTC carrier.  How do we know this?  Both the LTC and Life Insurance are being processed here at Cavalier Associates.  Why is this a problem?  We have a standard offer in hand for Life Insurance, and any new medical information will need to be disclosed to the life carrier.  Could be a non-issue, could be a big problem for our standard offer.

Here's the other issue - the client did not plan to execute on the Life Insurance for two more months!  He does not want to wait that long to follow up with his doctor on the LTC.  How can we conserve the life offer and allow him to take action on the decline?  There are a couple options:

• Go ahead and make the gifts in 2010 and pay gift tax on the amount in excess of the annual exclusion limit.
• Make a short term loan to the trust, to be paid back in January with 2011 annual exclusion gifts. 

Of course, this last strategy involves paying a bit of interest in order to be a legitimate loan, but given the current interest rate environment that small interest payment will be far less than any gift tax amount.  It is ultimately what we recommended to the producer and the client.  Once this is complete the client can then follow up with his physician to address the LTC declination.

The real point in sharing this case is that there is real value in using one firm to underwrite both the LTC and Life Insurance.  Of course, you as the agent can coordinate all of this, but I am confident that would not be the best use of your time, as it is not exactly a revenue generating activity!  Another point is the importance of everyone knowing the entire strategy.  Without an awareness of everything the client was trying to accomplish, we may not have been able to execute a strategy that gave us the best chance to successfully implement all facets of the client's Estate Plan.

Remember, good planning is a team sport!

As always, have a good weekend.