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January 2014 |
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Trust Planning with Life Insurance
and
Long-Term Care Riders
Clients are increasingly concerned with having enough funds accessible should long-term care needs arise later in life. The life insurance industry has responded to this by broadening the reach of traditional products. A new type of "hybrid" life insurance, which merges death benefit protection and a flexible, guaranteed premium schedule, along with a long-term care (LTC) rider[1], can help Clients manage potential long-term care costs while protecting families from financial hardship. Additionally, if benefits aren't completely utilized, the remaining dollars can help fund a financial legacy. Because Clients may also be concerned about Federal and/or state estate taxes, or wish to set parameters around the inheritance of a death benefit, they may want an Irrevocable Life Insurance Trust (ILIT) as owner of the policy.
It has generally been established that a life insurance policy with an indemnity LTC rider can be appropriately owned inside of an ILIT, vs. a reimbursement LTC rider. The difference being that an indemnity plan pays the benefit directly to the owner of the policy. Thus, if the insured qualifies for a $5,000 monthly benefit and an ILIT owns the policy, the $5,000 is sent to the Trustee. In contrast, with a reimbursement plan, the benefit is paid directly to the nursing home or agency providing the care, with the Insured submitting bills or receipts each month to the carrier. A reimbursement rider will generally not work for a policy owned by an ILIT because the reimbursement benefits the Insured and therefore brings the death benefit back into the Insured's estate. An indemnity rider can work because the LTC benefit is paid to the Trust.[2]
However, due to IRC � 2042 and the incidents of ownership issues inherent in this planning scenario, we submit that the appropriate considerations do not end here. Just as one does not simply "walk into Mordor," one cannot simply place a life insurance policy inside a traditional ILIT and intend to benefit the Grantor. The following is an overview of three ways LTC rider benefits can actually (and appropriately) get into the hands of the Insured under the life insurance policy owned by an ILIT.
1. For the right client situation, a potentially "simple" approach is to have the policy owned by the ILIT, but have the insured pay for any long term care expenses "out-of-pocket" (rather than borrowing money from the trust). The insured's direct payment for long term care reduces the insured's estate. Any long term care benefit paid to the ILIT is retained an invested by the ILIT which effectively results in a lifetime shifting of wealth from the insured (by the amount paid for long term care coverage) to the ILIT (the amount received as a long-term care benefit under the life policy) on a gift tax free basis.
2. When undertaking the ILIT drafting process (always in conjunction with a qualified estate planning attorney), there is some flexibility. One version of such a Trust gives the Grantor/Insured the right to borrow from the Trust, provided that he/she executes a demand note secured by other property owned by the Grantor/Insured and pays interest (usually accrued) at a fair market rate at least equal to any interest charged by the insurance company on loans the Trustee takes from policies owned by the Trust. A more conservative version would not permit the Grantor/Insured to make such loans, but the power would be given to the Grantor/Insured's spouse. An even more conservative version would permit such loans only in the discretion of the Trustee. In any event, the Grantor/Insured or spouse's right to borrow from the Trust would be subject to the Trustee's power to prohibit any loan that would cause the underlying life insurance policy to lapse or not extend to maturity.
3. One final option is to allow the Trustee to make discretionary distributions (without reference to the LTC rider) to Trust beneficiaries (spouse, children, etc.), while the insured is alive. The beneficiaries could then make loans or gifts to the insured to help cover his or her LTC expenses. The risk with this latter approach is that the IRS could view such payments to the insured as pre-arranged/obligatory on the part of the beneficiaries. And to date this strategy has not been endorsed by the IRS. There is also the "moral hazard" to be concerned about - that the beneficiaries, being under no real obligation to gift or loan the funds, won't.
Ultimately, it is most important that Clients work closely with their Financial, Legal, and Tax Advisors to arrive at the appropriate solution based on their individual facts and circumstances. Nevertheless, when working in conjunction with Advisors who might not be as familiar with the particular design of these products, it is important to highlight these considerations.
[1] Many carriers now offer this type of innovative policy design. However, so-called "chronic illness riders" are sometimes marketed as "true long term care riders" - it is important to distinguish between the two. For instance, to qualify for benefits under a "chronic illness rider," a Dr. must certify the Client's condition is "expected to be permanent."
[2] It is most important when considering any estate planning strategies that qualified legal advice be obtained. |
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| Promotion Nae | |
Call today to speak with one of our Case Consultation Specialists
for information on these and other sales opportunities and see why
ALB is The Business Partner You've Been Looking For.
Associated Life Brokerage, Inc., 135 Route 202/206, Suite #7 Bedminster, NJ 07921
info@associatedlifebrokerage.com
(908) 756-9800 Ext. 120
www.associatedlifebrokerage.com
Associated Life Brokerage, Inc., is a full service General Agency located in Bedminster, NJ handling your Life Insurance, Annuity, Long Term Care and Disability Income needs. We provide independent insurance agents with a comprehensive platform that includes, Expert Case Consultation, Premier Underwriting Services and a Fully Dedicated Case Management Team. With over 100 years of collective experience in advanced case design and underwriting, we are dedicated to giving you the tools you need to significantly increase your revenue. |
Underwriting Corner -
Urine Findings - RBCs, WBCs and Protein |
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Red Blood Cells (RBC) in the urine or hematuria could indicate a variety of things, but basically means there is some evidence of bleeding within the urinary tract which includes the kidneys, ureters, bladder and urethra.
Causes could include a stone, infection, trauma, or it could be an early indication of a cancer in the urinary tract. Trauma could also be caused by excessive physical activity or exercise prior to a urine sample being taken. Since hematuria could indicate a variety of issues including cancer, findings should be investigated until a cause is determined.
White Blood Cells (WBC) are usually an indication of some kind of active infection in the urinary track (kidney, bladder, urethra, prostate). If an acute infection, if retested after being treated, often the WBC count will be back to normal. If chronic, the cause of the infection should be determined and treated.
Excess protein in the urine comes from the kidneys. If Proteinuria (protein in the urine; it may also be called albuminuria) is constant/chronic, it may be an indication of some kidney disease process as too much protein means it is leaking through the kidney and needs to be investigated. |
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IUL Protector (NY) | |
IUL-Protector offers low-cost death benefit coverage with potential for cash accumulation. Product sweet spots include:
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- Lifetime and age 100 premium solves;
- Accumulation and Protection Combo illustrations with TermSmart;
- Fixed-account current assumption sales (due to low internal expenses); and
- 1035 loan rescue cases.
IUL-Protector is also now available in Guaranteed Issue situations in most jurisdictions nationwide, joining a broad list of ING products available in guaranteed and simplified issue cases. The guidelines and parameters for GI/SI in multi-life cases are outlined in the Guaranteed and Simplified Issue brochure. |
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Protective Indexed ChoiceSM UL, will be available for sale beginning January 13, 2014 | |
The current low interest rate environment combined with recent volatility has limited the options for clients who want death benefit protection and cash-value accumulation, but resist using variable investments due to the possibility of loss. With Protective Indexed Choice UL, clients can benefit from lapse protection, greater potential for cash-value growth and flexible features without the risk of directly participating in the stock market. |
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IUL Foundation Builder
Below are some highlights about the product:
- Designed for the Death Benefit market with affordable premiums (Top three consistently vs. the competition)
- Guarantees up to 30yrs, based on issue age
- Extremely strong cash value vs. traditional GUL giving you much more flexibility (to 1035 later, skip premiums, take a withdrawal, etc.)
- Larger targets than your traditional GUL (and they're rolling!)
- Great product for the Accelerated DB Rider for LTC Services...remember this rider covers both permanent and temporary long term care events [7702(b)
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Life insurance is about playing it safe. But it can also present an opportunity for growth.
Nationwide YourLife Indexed UL delivers both.
- Insulated growth - offers the potential to build cash value without the risk of market-based losses
- Value - designed with a low-cost expense structure
- Flexibility - features an optional indemnity-style long-term care rider
- Protection - provides a base guarantee
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Principal Financial Group |
Florida has approved Principal Index Universal Life FlexSM (IUL Flex) to sell.
View Current list of state approvals
Product Profile | |
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Beginning January 1, 2014, through March 31, 2014, you have the opportunity to receive up to $700 in Visa gift cards for the business you place with Minnesota Life.
Details:
- Brokers will receive gift cards for paid cases during the program, with a maximum of $700 in total winnings:
$200 for 4 paid cases*
Additional $200 for 7 paid cases*
Additional $300 for 10 paid cases*
- Cases must be paid between January 1, 2014, and March 31, 2014.
- All current pending business will count if the case is paid during the program dates.
- Contest is open to all producers appointed with Minnesota Life through the Independent Distribution Group.**
- Multiple product sales per insured are allowed. However, an identical product sale on same insured will not be counted as an additional case for this program.
- Qualifying business must remain in full force throughout the qualification period. Policies that lapse during the contest period will not count.
- Minnesota Life will be the final judge on all issues pertaining to the incentive program.
- Credit for split sales will be awarded based on percentages listed on the application.
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Prudential Insurance Company |
Introducing PruLife� Founders Plus UL
Your clients want permanent death benefit protection without having to choose between guarantees or growth. Our new PruLife Founders Plus UL (Founders Plus) potentially gives them both. It is a flexible premium permanent life insurance product that offers an Index feature and is designed to meet the changing needs of your clients, particularly those considering a Guaranteed Universal Life product.
Founders Plus can give clients:
- Cost-effective death benefit protection with the potential for cash value accumulation
- Competitive premiums-especially when compared to other permanent life insurance products
- Two interest crediting account options, a Fixed Account or a Plus Account with an index interest option for more upside potential
- An extended No-Lapse Guarantee
- Protection against the financial impact of chronic or terminal illness. Clients can choose, for an additional cost, to add the BenefitAccess Rider that advances up to 100% of the death benefit should they become chronically or terminally ill as certified by a licensed health care practitioner.
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Disclosure
Not all products approved in all States, please check State approvals. | |
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