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Questions? Contact our Sales Teams at (949) 863-0700. Life Insurance - Option 1 / Annuities - Option 2 / LTC - Option 3 / DI - Option 4.

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Multi Generational IRA Planning to Increase Life Insurance Sales

Over 43 million households are invested in Individual Retirement Accounts (IRAs) – and chances are your clients have a share in that number.
 
But perhaps they’ve come to realize they don’t need their IRA assets for income. Or maybe they’ve developed a portfolio of non-IRA assets that are sufficient to provide a comfortable lifestyle in retirement.

Due to the government’s Required Minimum Distribution (RMD) rules, the preference might be to continue deferring taxes on the IRA for as long as possible.

When the children inherit the IRA, their maximum years of deferral are based on their ages at the time they inherit the IRA. This fixed, maximum period cannot be extended regardless of whether the children pass away before this period has expired.
 
The children typically name the grandchildren as their beneficiaries. If the children pass away prior to the end of their maximum deferral period, the grandchildren inherit the balance of the funds, and the remaining balance of the deceased child’s maximum deferral period.
 
How Multi-Generational Beneficiaries Can Solve These Issues
 
Using Multi-Generational beneficiaries, your clients could make some minor changes to their current IRA beneficiary designations to enhance their legacy.
 
The key is understanding that IRA rules allow Designated Beneficiaries to continue deferral over a maximum deferred period that is based on their own life expectancy.
 
Therefore, when the grandchildren inherit the IRA, their younger ages enable them to continue the tax-deferral advantages for a longer period of time than the children could. This compounding of tax-deferred growth can create significant increases in your client’s legacy.
 
Simply consider replacing the children’s IRA inheritance by purchasing a Life Insurance policy with a death benefit equivalent to the pre-taxed value of the IRA, and make the children or an ILIT the beneficiary of the policy and the grandchildren the beneficiary of the IRA.
 
One significant advantage of using Life Insurance is that the death benefit is received by the children free from income tax. Thus, increasing the new inheritance, unlike an IRA inheritance that may be fully taxable to the children.
 
Consider This
 
Assume the parent’s IRA is projected to be worth $500,000 at the surviving spouse’s death.
 
The children would receive a $500,000 income tax free Life Insurance death benefit. The grandchildren would receive a $500,000 IRA and each grandchild will “stretch” the IRA deferral benefits over their individual life expectancies, according to IRS rules.
 
The grandchildren’s life expectancy is typically 20 to 40 years longer than the children’s life expectancy. This extension of the deferral period could be very advantageous to the overall performance of the IRA legacy.
 
Typically, the Life Insurance premium for clients over age 70 ½ are paid by using a portion of the RMD that your client’s are required to withdraw from the IRA. As you can see, Life Insurance can play an important role in the overall strategy of Multi-Generational Planning of your client’s IRA.
 
For more information, contact the Life Sales & Marketing Team.
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CPS LIVE! 5 Sales Ideas in 20 Minutes or Less ⚡ Wednesday, September 11

CPS LIVE!  5 Sales Ideas in 20 Minutes or Less

Wednesday, September 11th – 11.00 AM to 11.30 AM PST

REGISTER NOW

Hear directly from the CPS Marketing Managers as they target the latest sales strategies and top selling products for Life Insurance, Annuities, Long-Term Care, Income Protection and Advanced Markets.

Questions?  Contact our Sales Teams at (949) 863-0700.  Life Insurance – Option 1 / Annuities – Option 2 / LTC – Option 3 / DI – Option 4.

Parkinson’s Disease: Standard Is Possible!

Parkinson’s disease affects about one million people in the United States and ten million worldwide.

The cause remains largely unknown. Although there is no cure, treatment options vary and include medications and surgery.

One of our A+ carriers takes a responsibly aggressive approach to underwriting Parkinson’s disease and can offer favorably on those cases that are well controlled with other favorable risk factors.
 
Take a look at this recent case study:
  • 65-year-old female
  • Applying for $500k of Term coverage
  • Non tobacco user
  • Diagnosed with Parkinson’s disease two years ago
  • On low dose of Sinemet daily with no progression of symptoms
Initial underwriting assessment of Table 2.
 
With the application of the following credits:
  • Controlled blood pressure
  • Good cholesterol ratio
  • Routine physicals and preventative screenings
  • Good family history
  • No tobacco use in the past 10 years
Underwriting offer after credits: STANDARD!
 
Contact our Underwriting Team today to see how we can help you place your next impaired risk case.
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Statistics – Can They Add Value To LTC Planning?

In the complex world of long-term care (LTC) planning, one question frequently arises: “What is the average LTC claim?”

This question, asked by financial professionals and consumers alike, reflects a common desire to quantify the need for LTC insurance and determine the appropriate benefit period.  However, the reality is far from simple.

While statistics can provide valuable insights, relying solely on averages can be misleading due to the numerous variables at play in each individual’s circumstances.

Are these statistics reliable?  How should they be interpreted?  And, most importantly, can they truly add value to the decision-making process for LTC coverage?

Click HERE for the answers to these questions and more! 

Contact your LTC Specialist for assistance with any long-term care coverage needs.

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3 Things Employees Don’t Know About Their Disability Benefits

Protecting one’s ability to earn an income remains among the most important financial planning goals for many individuals.

Without income, many financial strategies can simply derail.

Yet, many employees with employer paid LTD plans could be under-insured in the event they became too sick or injured to work.
 
A new study released by The American College, Employer Perspectives on Disability Benefits, conducted by the Boston Research Group, shows:
 
  • Most group Disability Income benefits are taxable. Employees may receive a benefit that is only half their paycheck amount.
  • Few group Disability plans protect variable compensation. For employees who depend upon overtime pay, commissions and bonuses, the post–disability reality could mean not having enough income to meet their expenses.
  • High earners are maxed out. The maximum benefit amount in group plans limit benefits for highly compensated Executives and Business Owners.
For more information or sales ideas about Disability Income Insurance, contact your Disability Income Insurance Manager today.
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The Problem With LTC Riders In The Third Person

Climatologists can argue all day about which hurricane was the worst. The fact of the matter is the “baddest” is the one that destroyed your home, the number of millibars notwithstanding. And back in the old days they all were the baddest because you didn’t have any warning.
 
Nowadays, sophisticated stuff starts measuring a storm as soon as some breeze off North Africa throws a few straws into the wind, allowing homeowners in the “cone” to take proper measures, and all the ships at sea.

And so it is with tax laws, the worst is the one that costs you – made worse by the fact that you didn’t see it coming.

And both may be true depending on how you structure third-person ownership of a life insurance policy with a chronic illness or LTC rider.
 
The most common planning question involves estate taxation.
 
Insureds want to keep the death benefits out of their taxable estate, but still want access to the rider benefits should the need arise. Policies with indemnity-type riders are commonly put in irrevocable trusts with the understanding that care costs can be paid out-of-pocket by the insured to reduce the taxable estate. If the cash payments under the rider are needed by the insured, the trust can provide for loans to the insured.
 
Reimbursement-type riders present a problem.
 
Because expenses are paid directly to the care provider the trustee is bound by the terms of the policy to benefit the creditors of the grantor/insured. This could constitute either an incident-of-ownership in the policy or a retained interest in the trust, either of which would have the effect of pulling death benefits back into the taxable estate.
 
But there may be another tax problem lurking in the weeds for trust-owned life policies, even those with indemnity-type riders, and this time it is an income tax issue. IRC 101 is the section allowing for income tax-free receipt of proceeds from a policy by reason of death.
 
Regarding treatment of accelerated death benefits subsection (g)(1)(B) says:
 
For purposes of this section, the following amounts shall be treated as an amount paid by reason of the death of an insured . . . Any amount received under a life insurance contract on the life of an insured who is a chronically ill individual.
 
But then the Code goes on to say in subsection (g)(3)(A):
 
In the case of an insured who is a chronically ill individual . . . [tax-free treatment as an accelerated death benefit] shall not apply to any payment received for any period unless— such payment is for costs incurred by the payee [the person getting paid the benefit, i.e. the policy owner] for qualified long-term care services provided for the insured for such period.
 
This raises the possibility that benefits paid to a third-party policyowner will not get income tax-free treatment under the rider because the third-party owner (the payee) did not incur the medical costs resulting in the claim. Material on the topic warns, “. . . there is no specific guidance from the Internal Revenue Service as to the tax effects of such third-party ownership . . . there is the risk that such ownership structure could cause adverse income, estate and/or gift tax consequences.”
 
The responsibility of the insurance advisor is clear.
 
When helping a client implement third-party ownership of a life policy with an LTC or chronic illness rider the client must be pressed to get the advice of a tax advisor.
 
To sow the wind by not doing so it to risk eventually reaping the whirlwind. For help in addressing this concern with you client, contact your LTC Sales & Marketing Manager.
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The Underwriting Differentiator

We are ready for the challenge…

Bring us your difficult cases and let us help you turn them into policies for your clients and commissions for you.

Case Study:
  • Female, age 68, non-smoker
  • Seeking $1 mil of UL
  • Two vessel coronary artery disease with coronary bypass surgery performed 3.5 years ago
  • Our offer: Standard!
Our experience and expertise make a difference – we’ll be your advocate.
 
Contact our Underwriting Team today.
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Happy Labor Day from CPS!

Happy Labor Day Weekend!

Labor Day is dedicated to the social and economic achievements of American workers. Enjoy, relax and celebrate with your family and friends.

Our office will be closed on Monday, September 2nd, in observance of the holiday.  We will resume normal business hours on Tuesday, September 3rd.

If you need any information, forms or quotes, please visit our website www.cpsinsurance.com.

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Join us for Happy Hour 🍻 Thursday, September 12

Join us for Happy Hour at Villains Brewing Co!

Villains Brewing Co | 555 S Anaheim Blvd, Anaheim, CA 92805
Thursday, September 12th – 5.00 PM to 7.00 PM

RESERVE A SEAT

Connect with the CPS Sales Teams and other producers just like you. Stop by anytime between 5.00 PM & 7.00 PM to enjoy some drinks on us!

Questions?  Contact the CPS Sales Teams at (949) 863-0700.  Life Insurance – Option 1 / Annuities – Option 2 / Disability Insurance – Option 4.

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Inflation Protection: One Size Doesn’t Fit All

Increasingly, people are recognizing the need for Long-Term Care (LTC) Insurance earlier in life.
 
Since your clients may purchase a policy 20 to 30 years before they might need to use their benefits, it’s important to consider inflation protection when you design their Long-Term Care Insurance plan.

Inflation protection riders can help protect your clients’ assets against the rising costs of LTC.

With so many riders available, which one should your clients choose? Which option is the best for a particular client depends on many factors, including their risk tolerance, personal preferences and budget.
 
3% or 5%?
 
When it comes to compound inflation protection options, your clients’ choice is often between the 3% or the 5% benefit increase riders.
 
Historically, the 5% compound inflation protection option was often considered the best choice because it maximizes the potential pool of benefits. However, the cost of long-term care is now rising at a lower rate than in the past.
 
For many years, nursing home and other long-term care costs increased at around 7% per year. Currently, the average five-year annual growth of facility care was about 4%. The cost of home care has been increasing at an even slower rate, with average five-year annual growth of just above 1%.
 
Compared to the 5% compound inflation protection option, the 3% option is less expensive, and the data suggests it may provide adequate inflation protection to keep up with the rising cost of home care.
 
Know Your Client
 
Your clients have several alternatives to help protect them from the rising cost of care. A 3% benefit increase rider may be the right option for those clients looking for dependable inflation protection at a lower cost.
 
Talk to your clients about their priorities, and help them choose the best inflation protection option for them.
 
We’re here to help you design a plan that is both affordable and the best solution for your clients’ needs – contact your LTCi Sales Rep for guidance.

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