There are few things worse in our business than a willing premium payer who cannot obtain coverage based on their health history. In fact, I think it may actually BE the worst. In one case, however, it was the catalyst for a huge case and a truly exceptional estate plan for the client and their family, all the way to the grandchildren.
So how did this all come about? The genesis is in the scenario described above - a family worth $70MM planning for the seemingly unavoidable estate tax bill looming in the near future. Gifting, even under today's $5.12MM exemption environment, was not going to be enough. Life insurance was out, as both the Patriarch and Matriarch (G1) are currently uninsurable and the current in force coverage is not adequate. That left other planning techniques as the only potential solution, and would normally spell the end of involvement for the life agent as the other advisors stepped in to do what they could. Fortunately for all involved, this life agent was a bit more tenacious.
How tenacious? After exhausting all insurance options, we suggested he consider meeting with a team of advisors that have assembled a planning structure that just might work for this family. The agent met with and engaged the team of outside advisors, and introduced them to the family and their CPA. Eventually, a relationship and estate planning structure evolved that resulted in the following:
- A complete overhaul of the current G1 estate plan
- Significantly increased asset protection
- Maximum levels of control for G1
- Maximum gift tax efficiency
- Ensured the transfer of G1's assets to Generation 2 (G2, their two sons) and subsequently to Generation 3 (G3, 6 grandchildren)
- Realized significant valuation discounts - potentially 80%
- Generated a life sale with a target premium of over $810,000
G1's two sons each have a current net worth of approximately $1MM. Despite this relatively low net worth, the team of advisors was able to communicate the high level of control in the resulting estate plan and the valuation of G2's beneficial interest in G1's estate to the carrier. This intimate knowledge of not only the family's net worth, but also their plan allowed the carrier to approve a total of $40MM of survivorship coverage on G2, projected to grow to over $52MM over the next 30 years. When combined with a premium finance structure to minimize both the cash outlay and gift taxes the result is a comprehensive and efficient estate plan that pushes much of the potential estate tax down to G2 who are not only much younger, but are insurable!
As great a story as this is, it is only useful to the reader if you are able to apply it to your practice. With that in mind, please see the client profile to learn more about the type client who can benefit from planning of this nature. Remember, this works DESPITE G1 being uninsurable, not because of it. Of course, there is much more to the story than these bullet points and supporting documentation. If you are serious about working in the high net worth market, you can learn from the experts who put this all together by attending the first in the recently announced Cavalier Advantage Collaborative Seminar series. Click here to register for this web event scheduled for June 14th at 10:00 AM Pacific.
