Blog
Stacking Estate Planning Concepts – Saving Heirs a Lot More!
By now all high-net-worth clients should be aware that their biggest death-tax savings opportunity – the lifetime exemption – is going to be cut in half on January 1, 2026. But taking advantage of the high exemption by gifting property now is only the beginning of how much death taxes can be reduced.
A good rule of thumb:Â your clients who will benefit are single taxpayers worth over $10,000,000 and married taxpayers worth more than $20,000,000.
Consider these very brief descriptions of accepted planning concepts that address the common questions HNW clients will ask, and that can be layered on top of the current use of the high exemptions. They can result in a much smaller tax bill as well as allowing for ongoing property management and use even after gifting takes place.
How much can I save using the full exemption now?
A single taxpayer who uses the full higher exemption by gifting from an estate growing at 5%, might reduce the tax due in 20 years by over $6,000,000. A married couple using both could save over $12,000,000.
What if my spouse and I don’t want to give away both exemption amounts?
Then use at least one full Again, assuming 5% growth, this could save over $6,000,000 in 20 years.
What if Congress decides not to reduce the exemption amount?
Transfer of assets can be treated as a Family Loan (usually to an irrevocable trust). If the exemptions are not reduced the loan can be called, and the property returned. If exemptions are lowered then the loan can be forgiven just prior to 1/1/2026 and the property kept in the trust, treated as a gift.
What if I don’t want to lose control of the gifted assets?
Assets to be transferred can be organized under a Family Limited Liability Company (FLLC) with a small-percentage voting interest and a large non-voting interest. The non-voting interest, representing the bulk of the FLLC value, can be transferred while the taxpayer retains all voting interest.
Can a gifting spouse continue to benefit from the assets transferred?
Yes, property can be transferred to a Spousal Lifetime Access Trust (SLAT), an irrevocable trust in which the other spouse is a beneficiary for life. The beneficiary spouse can receive the income from the trust each year, as well as distributions for his or her health, education, maintenance, and support. This gives the gifting spouse vicarious access (through the beneficiary spouse) to the transferred assets, if needed. When the beneficiary spouse dies, nothing in the trust is included in his or her estate.
Can spouses set up two SLATs so that each can use their full exemption for the benefit of the other?
Yes, but special attention must be given to the drafting of the trusts by the legal and tax advisors involved, because certain restrictions apply, so as not to run afoul with the IRS.
If you think implementation of any or all of these concepts might help one of your HNW clients, I am available to talk more fully with you, and your client, and their advisors. Let me know at 706-614-3796 or tom@cpsadvancedmarkets.com.
Policy Review Options
Policy review can be a great tool to get your foot in the door with a new or existing client.
You will often find that the current policy is grossly underperforming due to the decrease in interest rates and that the policy is in danger of lapsing without increased premium payments.
Upon review, if your client is having trouble keeping up with increased premium payments because of underperformance or keeping up with existing premiums because of fixed income limitations, talk to them about our variety of Term/UL Hybrid products.
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Before the cash values are exhausted to help pay premiums for an already unaffordable policy, show your clients how to utilize a 1035 exchange into one of these Term/UL hybrid products to lower current premiums or purchase a paid up policy.
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How does it work?
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With carriers beginning to introduce Term/UL Hybrid products, it can give your client an option to have a policy that combines flexible premium structure of a UL with the affordability of Term Insurance.
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Most of these products accept a variety of different premium payment patterns including a single payment from a 1035 exchange unlike a traditional Term plan. They are purchased in guarantee periods of 10, 15, 20, 30 years but include a secondary guarantee that will run to age 121. This secondary guarantee can be accessed by paying an increased premium if the client wishes to extend their coverage without undergoing medical or financial underwriting.
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As more of our major carriers begin to replace their traditional Term products with these Term/UL hybrids, it opens the opportunity for significant 1035 exchanges to be made from an underperforming policy into these products in order to purchase a paid up plan or ascertain a greater death benefit.
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If you have a client in mind that would benefit from one these hybrid products please or contact your Life Sales Desk to learn more!
LTC Awareness Month Resources From Thrivent
Every November, the industry – led by Life Happens – comes together to sponsor Long Term Care Awareness Month. This campaign is designed to educate consumers about the importance of long-term care and the role it plays in protecting families’ financial security.
To take advantage of heightened awareness in the marketplace during the month of November, Thrivent has packaged some of the most popular resources designed to raise awareness and drive contact with financial advisors.
The lack of conversations:
- 92% of consumers believe that financial professionals should talk about long-term care plans with their clients.1
- 59% of people have not had a conversation with anyone about LTC planning.2
- 2% of those that have had such a conversation had it started by their Financial Advisor.2
The opportunity:
- 29% of respondents to a LIMRA survey believe they own some form of long-term care insurance, while data shows actual LTC ownership is closer to 3.1%.3
To take advantage of heightened awareness in the marketplace during the month of November, Thrivent has packaged some of the most popular resources designed to raise awareness and drive contact with financial advisors.
- This kit includes:
- About Thrivent
- Conversation resources
- LifeHappens videos, social media and flyers
- Upcoming events
- Sales strategies
- Info on the Caregiver Resources benefit
and more!
DOWNLOAD RESOURCE KIT1 Planning for Long-Term Care—New Findings from a 2023 Survey of Financial Professionals and Consumers. Versta Research, August 2023.
2 Thrivent’s 2021 Extended Care Planning Survey, Conducted by Morning Consult, March 2021.
3Â Do Consumers Really Understand Long-Term Care Insurance?, LIMRA Newsroom, 11/15/22.
Webinar
Nov 8, 2023 01:00 PM Central Time
A Deep-Dive on Thrivent’s Traditional LTCi Solution
Learn about the benefit-rich standalone LTCi product, backed by an A++ rated fraternal insurer, that is now available to independent producers. Thrivent will discuss the benefits, riders and sweet spots where Thrivent shines.
This session provides a deeper look at Thrivent’s traditional LTC solution, including:
- A refresher on Thrivent’s differentiators against others in the industry.
- Innovative inflation options
- Case studies showcasing plan design concepts.
- Underwriting niches and the importance of prescreening health.
- Caregiver resources benefit to support family caregivers.
Stacking Estate Planning Concepts – Saving Heirs a Lot More!
By now all high-net-worth clients should be aware that their biggest death-tax savings opportunity – the lifetime exemption – is going to be cut in half on January 1, 2026. But taking advantage of the high exemption by gifting property now is only the beginning of how much death taxes can be reduced.
A good rule of thumb:Â your clients who will benefit are single taxpayers worth over $10,000,000 and married taxpayers worth more than $20,000,000.
Consider these very brief descriptions of accepted planning concepts that address the common questions HNW clients will ask, and that can be layered on top of the current use of the high exemptions. They can result in a much smaller tax bill as well as allowing for ongoing property management and use even after gifting takes place.
How much can I save using the full exemption now?
A single taxpayer who uses the full higher exemption by gifting from an estate growing at 5%, might reduce the tax due in 20 years by over $6,000,000. A married couple using both could save over $12,000,000.
What if my spouse and I don’t want to give away both exemption amounts?
Then use at least one full Again, assuming 5% growth, this could save over $6,000,000 in 20 years.
What if Congress decides not to reduce the exemption amount?
Transfer of assets can be treated as a Family Loan (usually to an irrevocable trust). If the exemptions are not reduced the loan can be called, and the property returned. If exemptions are lowered then the loan can be forgiven just prior to 1/1/2026 and the property kept in the trust, treated as a gift.
What if I don’t want to lose control of the gifted assets?
Assets to be transferred can be organized under a Family Limited Liability Company (FLLC) with a small-percentage voting interest and a large non-voting interest. The non-voting interest, representing the bulk of the FLLC value, can be transferred while the taxpayer retains all voting interest.
Can a gifting spouse continue to benefit from the assets transferred?
Yes, property can be transferred to a Spousal Lifetime Access Trust (SLAT), an irrevocable trust in which the other spouse is a beneficiary for life. The beneficiary spouse can receive the income from the trust each year, as well as distributions for his or her health, education, maintenance, and support. This gives the gifting spouse vicarious access (through the beneficiary spouse) to the transferred assets, if needed. When the beneficiary spouse dies, nothing in the trust is included in his or her estate.
Can spouses set up two SLATs so that each can use their full exemption for the benefit of the other?
Yes, but special attention must be given to the drafting of the trusts by the legal and tax advisors involved, because certain restrictions apply, so as not to run afoul with the IRS.
If you think implementation of any or all of these concepts might help one of your HNW clients, I am available to talk more fully with you, and your client, and their advisors. Let me know at 706-614-3796 or tom@cpsadvancedmarkets.com.
Policy Review Options
Policy review can be a great tool to get your foot in the door with a new or existing client.
You will often find that the current policy is grossly underperforming due to the decrease in interest rates and that the policy is in danger of lapsing without increased premium payments.
Upon review, if your client is having trouble keeping up with increased premium payments because of underperformance or keeping up with existing premiums because of fixed income limitations, talk to them about our variety of Term/UL Hybrid products.
Â
Before the cash values are exhausted to help pay premiums for an already unaffordable policy, show your clients how to utilize a 1035 exchange into one of these Term/UL hybrid products to lower current premiums or purchase a paid up policy.
Â
How does it work?
Â
With carriers beginning to introduce Term/UL Hybrid products, it can give your client an option to have a policy that combines flexible premium structure of a UL with the affordability of Term Insurance.
Â
Most of these products accept a variety of different premium payment patterns including a single payment from a 1035 exchange unlike a traditional Term plan. They are purchased in guarantee periods of 10, 15, 20, 30 years but include a secondary guarantee that will run to age 121. This secondary guarantee can be accessed by paying an increased premium if the client wishes to extend their coverage without undergoing medical or financial underwriting.
Â
As more of our major carriers begin to replace their traditional Term products with these Term/UL hybrids, it opens the opportunity for significant 1035 exchanges to be made from an underperforming policy into these products in order to purchase a paid up plan or ascertain a greater death benefit.
Â
If you have a client in mind that would benefit from one these hybrid products please or contact your Life Sales Desk to learn more!
Approaching LTCI For Couples With No Children
The need for long-term care does not discriminate. No matter what your income is, your marital status, or any other demographics that come into play – when you need long-term care, you need long-term care.
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Clients with families and children typically consider themselves to have a “default” caregiver, someone who will always be on call if they were to encounter a long-term care situation. But what about your clients who do not have any children? How do they approach their need for long-term care?
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Although couples may face the same long-term care risk as families with children, their situation may create a different set of challenges.
Not having a “default” caregiver in the form of a child can force your clients to think creatively about their long term care strategy.
Ask your clients, how do they want to live their life?
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Living life without children opens up new possibilities and introduces some unique challenges. They may have more freedom to delve into their career and explore their interests. Yet, they may need to put more thought into long-term care than people with kids.
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They could have a heightened need for professional assistance, since an adult child won’t be “on call” when and if they need help. And, if they’re part of a couple, they might bear a greater part of the work of providing care than they would if they had children.
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Accidents, chronic illness, or simply the effects of aging could all result in a need for long-term care in the future. That’s why it’s important for everyone to take steps to preserve their quality of life and financial assets as they age.
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We’re here to help you design a plan that is both affordable and provides the best solution for your clients’ needs. Contact your LTCI Sales Reps for guidance.