A few weeks back I talked about a number of strategies we are using to maximize the amount our clients pass to the next generation. It turns out I left one great idea out. If you recall, the foundation of the discussion was identifying clients with "excess capital". This means that they have more than enough assets to cover their support and maintenance for life. Many of these clients will have already identified an asset or assets that they want to pass on to their children or grandchildren.

In that prior Rant we identified some inefficiency with the assets in question, and subsequently recommended repositioning some or all of that asset into a life insurance policy. Today, however, we look at a different take on that same strategy - excess income rather than excess capital. Is the client receiving income that they would rather defer? Are they just stuffing it in the bank because they are unsure what to do with it?

This can come from two places - Required Minimum Distributions, and Social Security income. The concept is more or less the same - a high net worth client is now forced to take income despite the fact that they are receiving more than enough to live on from their other holdings. Let's take that income, less the taxes due, and reposition it in to a life insurance contract. From there it is virtually identical to the prior discussion. Consider the following analysis:

• Husband age 69 and female age 65, both Preferred Nonsmokers
• $24,000 of Social Security Income each year
• 40% combined income tax bracket
• Projected tax = $9600
• After tax income = $14,400

Great, now what? Use the after tax amount to buy an SGUL (Survivorship Guaranteed UL) contract. How much does it buy? Right around $1mil. How long would it take to accumulate that large a pool of assets at $14,400 per year? If we use a 5% net rate of return (and that may be a bit high!) it would take 31 years! Factor that in along with the fact that the life insurance is guaranteed and I think we have a winner. I'll trade an uncertain outcome for a certain one any day!

That's it for this week. Enjoy your time with family and friends at Thanksgiving!