You have clients that own Survivorship Life (SL) plans
in their portfolio. Many are Survivorship Whole Life (SWL) with large cash
values or traditional Survivorship Universal Life (SUL) plans with limited
guarantees. Considering a low cash value Survivor No-Lapse Guarantee UL (SULG)
may be a great way to ensure the estate plan is GUARANTEED to work. Let
me, the AppMan, show you how this works.
An SL plan is a Last-To-Die or Second-To-Die life insurance product that
pays on the death of the second named insured. Most SL plans are used to
mitigate estate tax requirements in a taxable estate.
Let's assume your client has a Survivorship Whole Life (SWL) policy in
place. As you know, a SWL policy carries large cash values. In an estate
tax mitigating plan, the cash values are rather immaterial to the overall
plan. The SWL is not going to pay the death benefit plus the cash value;
it is only going to pay the death benefit plus
some paid up additions, if any. Therefore, all of that cash sitting there
is just reducing the insurers net amount at risk, while the client is
paying for that feature, and it is not necessary.
Let's look at an example:
A couple currently both age 75, purchased a $1,000,000 SWL in an ILIT
(Irrevocable Life Insurance Trust) 20 years ago. They have been paying
$17,820 per year for the past 20 years. The current surrender value of the
policy is $543,128. The current death benefit is $1,179,400, including the
paid up additions. There are some dividends beginning to be available for
supplementing the premium but with the economy as is, they are afraid to
rely on the dividends. Their estate has grown and they now may have a
higher federal estate tax burden. They would like to lower their premium
or increase their coverage for the same premium. They do not need the
cash; the goal is MAXIMUM DEATH BENEFIT with low premiums. AppMan has the
answer; 1035 Rescue with a SULG.
How would this work?
- Secure inforce illustrations showing the
existing policy performance and options. Do not replace the existing
policy if you cannot put the client in a better position with a new
product.
- Evaluate several products to see how they will
perform compared to the whole life.
- Take an application and get an underwritten
offer.
- Once approved, evaluate once again. If the new
product provides a lower premium or higher death benefit, proceed.
- Transfer the cash value, via Section 1035 Exchange
or use the cash to fund alternative plans.
After the clients are approved
with the new life carrier, let's look at the outcome.
|
Original Policy |
New
Policy Options |
Click Here to View
-
Participating Whole Life
-
Current Death Benefit: $1,179,400
-
Annual Premium: $17,820
-
Current Surrender Value: $543,128
-
Both issued Preferred Non-Tobacco
|
AppMan's
Choice 1
(Increase Face, Use 1035 Exchange)
Click Here to View |
AppMan's
Choice 2
(Same Face, Cash out current policy and fund Long Term
Care or other needs)
Click Here to View |
- Survivor No-Lapse Guarantee UL
(SULG)
- Lifetime guaranteed premium and
death benefit.
- 1035 Premium: $543,128
- Death Benefit: $1,741,584
- Increased Face Amount $562,184
over current plan
- Annual Premium: $0.00
- Total Annual Savings for the
Client: $17,820
- Both issued Standard Non-Smoker
(Slight change in health over the past 20 years)
- Agent Commission Estimate:
$41,338 (77% Commission of $40,634 Target, 2.00% on Excess)
|
- Survivor No-Lapse Guarantee UL (SULG)
- Lifetime guaranteed premium and
death benefit.
- Use no 1035 Premium
- Initial Death Benefit: $1,000,000
- Annual Premium: $22,945
- Both issued Standard Non-Smoker
(Slight change in health over the past 20 years)
- Use the cash value to buy a fixed
deferred annuity to fund a long term care plan. Pay for the long
term care with the interest earnings from the fixed deferred
annuity.
- Annuity Value: $543,128
- Total Death Value including
annuity value: $1,543,128
- Increased death value over
current plan (includes the life and the annuity): $363,728
- Increased annual cost over
current plan: $5,125
- Agent Commission Estimate: $18,000
on Life Sale (77% Commission of $23,376 Target)
- Agent Commission Estimate: $27,156
on Annuity Sale (5% Commission of $543,128
- Agent Commission Estimate: $10,000
on Long Term Care Sale (60% Commission of $16,700 Long Term Care
Premium)
- Total Commission Estimate for
the Life, Annuity and Long Term Care Sale: $55,156.40
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