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Policy Conversions & Ownership Transfers: All Things In Good Order

It was an eye-opener the first time I walked into the office of a civil engineer back in the 1970s and saw, spread across an entire wall, the flowchart mapping out the relationship and time sequence of all that was involved in getting an eight-story building there in the Burg from ground-breaking to grand-opening.
 
The complexity of the diagram was a mind boggle of boxes at several levels top to bottom, each containing a task that demanded completion before progression on the line to the next box was possible.
 
As we sit comfortably in the air-conditioned result of a similar building plan, the ease with which we can turn a tap or flip a switch seldom causes us to pause and think of all that got us there.

The order of things is essential. The correct order is critical. Fortunately the order and timing of insurance conversions and ownership transfers is less complicated.

A common planning scenario involves a personally-owned term policy where conversion is considered because of a decline in the health. The goal is to transfer the policy to an irrevocable trust either to protect the death benefit from estate taxes, creditors or spendthrift heirs – or any combination of the three!
 
The issue at hand is whether to convert before or after the transfer of the policy to the trust.
 
The answer will probably turn on the “best” fair market value for the contract.
 
Most advisors will probably choose to determine that the FMV of the term policy is its interpolated terminal reserve. Level term products do have a reserve to offset the “underpayment” of premium in the later years when the insured is older, but the premiums remain the same. On the other hand most advisors will determine that the FMV of the new permanent policy (in its first contract year) as premiums paid. Usually the advisor will opt for the lower of the two.
 
If the policy is to be gifted to the trust the lower FMV could keep the gift within sum of the available annual exclusions (usually $14,000 per trust beneficiary) to avoid the need to file a gift tax return.
 
If the policy is to be sold to a grantor trust (to avoid the three-year look-back), the lower FMV will require that less cash be gifted to the trust to be used by the trustee to purchase the policy from the insured/grantor.
 
Call us when client planning involves the combined issues of policy conversion and ownership transfer. We will assist in getting the information for determining the FMV of both policies and will assist legal and tax counsel with the information they need to properly order the transactions.
 
Back to the 70s – before the eight-story was completed I had gotten to know many of the workers at the job-site. They complained that working construction was too much like Christmas Day. They did all the work only to have some fat guy in a suit get all the credit.
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The Overlooked Value Of Life Settlements For Seniors And Their Families

For many seniors, a life insurance policy is one of their most valuable—but least understood—assets.

Too often, policies are surrendered or allowed to lapse simply because premiums become burdensome or the original need for coverage has changed. That’s where life settlements come in.

A life settlement allows a policyholder to sell an existing life insurance policy to an institutional buyer for more than the cash surrender value but less than the death benefit. The buyer assumes responsibility for future premiums and collects the death benefit later. For the policyholder, this can unlock significant value—often tens or even hundreds of thousands of dollars—that would otherwise disappear.

For families, this liquidity can make a real difference.

Proceeds from a life settlement can help cover long-term care costs, supplement retirement income, pay off debt, or simply improve quality of life. It’s a dignified financial option that rewards years of premium payments rather than letting them go to waste.

Advisors and insurance professionals play a key role here.

By identifying clients who no longer need—or can’t afford—their coverage, you can help them turn a dormant asset into an active financial resource.

The bottom line: life settlements aren’t a niche solution. They’re a smart, regulated, and increasingly essential planning tool that can deliver real financial relief and flexibility to seniors and their families when it’s needed most.

Contact your Life Sales Associate for more information on this strategy.

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How To Multiply Your Sales Using Just The Basics

How much does an insurance company think that your client is worth? Many times, it is much more than how much your client actually does, and we have their underwriting guidelines to prove it! Let’s factor in the details that could multiply your sales.
 
The most common insurance need among clients is to replace the income survivors would have anticipated had premature death not occurred. The starting point for calculating the amount of coverage a carrier will issue for purposes of income replacement is determined by a multiple of current annual compensation based on the proposed insured’s age.

The multiple decreases with age, understandably, because death denies a person fewer potential income-producing years as they get older. Multiples vary from company to company.

Consider one of the more aggressive examples:
AGE / MULTIPLE

To Age 40 / Multiple 35
Ages 41 – 50 / Multiple 25
Ages 51 – 60 / Multiple 20
Ages 61 – 70 / Multiple 10
Ages 71 – 80 / Multiple 5

Carriers will usually only take earned income into consideration unless it can be shown that the insured’s death might have a direct effect on unearned income. Many of our carriers can insure non-working spouses, too, for an equal amount as the working spouse. This could yield two sales instead of one.
 
Please note that each carrier has their own specific guidelines, so contacting the Life Underwriting Team first to get those details will be key. We’ll do the math for you. Multiplying those sales never looked so good!

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A Fresh View On The LTC Insurance Market

Learning how to adjust to the changing market is crucial to the continued success of your Long-Term Care (LTC) Insurance business.
 
Today’s market reflects an expanding, diverse clientele, so being able to respond to their unique needs and budget constraints is critical. The first step is to understand their concerns around buying coverage, including potential objections about the cost of a policy.

Adapting your approach to the new market will not only demonstrate that you are responding to changing trends, but will ultimately help to increase your LTC Insurance business.

3 important concepts to consider:
Who Should I Target?
 
The “younger” segment of the LTC Insurance market includes 45-55 year olds. And while they may understand the need for LTC Insurance, many have competing financial responsibilities, and feel they don’t have the disposable income to spend on a policy. Your challenge is to create a sense of urgency about the importance of applying when they are younger and healthy, and show them there are affordable ways to access LTC Insurance coverage.
 
How Can I Help My Clients?
 
Your clients may not know that they have a surprising amount of flexibility when designing LTC Insurance coverage. Buying a policy is not an all-or-nothing proposition. If you start with a policy design that addresses 100% of your clients’ anticipated future care needs, you can offer alternate designs to help lower the premium, if necessary.
 
For example, suggest shortening the Benefit Period to 3-5 years to save money, while providing ample coverage for most care needs. Leaving off compound inflation protection can also make a big impact, potentially cutting the premium in half. With this strategy, consider other alternatives for inflation protection or a higher initial daily benefit to account for future cost of care.
 
What Can I Do To Succeed?
 
One of the characteristics of the new market is that the public is more aware of the need to plan ahead for LTC. They are open to having long-term care planning discussions, and will welcome your guidance. Take a proactive approach and make it a priority in your practice to initiate LTC planning discussions with your clients by age 50.
 
By connecting with your clients, emphasizing the value of LTC Insurance protection, and showing that coverage can be adjusted to meet their budget, you will demonstrate that you have their personal needs in mind and are on top of the latest product offerings. And, that is a recipe for success for years to come.
 
Contact your LTC Sales & Marketing Associate today for more resources and information.

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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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Using Excess RMDs To Increase Your Legacy

The London Bach Choir has been around since 1876 when it debuted with a performance of Bach’s B Minor Mass. For the next ninety or so years their gig didn’t get much attention except among those with a musical preference for things like, well… the B Minor Mass.
 
But all that changed in 1969. Their exposure and listener-ship ballooned when popular singer-songwriter Michael Philip Jagger solicited their participation in a recording with his rock group, The Rolling Stones. The result was a tune that has since become a staple in The Stones’ performance repertoire and in the world of popular music.
 
Few today are unfamiliar with its iconic lyrics:
 
You can’t always get what you want.
But if you try sometime,
You just might find,
You get what you need.
 
And so it is when older clients reach age 70-1/2 and want to use the required minimum distributions (RMDs) from qualified plans as a source of premium to buy insurance coverage, sometimes in response to carrier marketing programs encouraging the practice.

As an advisor, you should be aware of and alert your clients to several issues in this marketplace if you are to effectively manage expectations as well as make an achievable sale.

Middle-market prospects often don’t have financial justification for coverage.
 
In these days of sizeable lifetime exemptions most don’t face any anticipated estate tax and most don’t have an income replacement need because they have little or no earned income in their retirement years.
 
Carrier enthusiasm is curbed when traditional financial needs don’t exist.
 
And this despite marketing campaigns to the contrary. An underwriter on a case is like the conductor on a train. Nothing moves down the track till he or she gives the word. And sales pieces are not always run by a carrier’s “conductor” prior to distribution.
 
The percent-of-net-worth solution.
 
Many carriers are sympathetic to issuing insurance in an estate for liquidity, inheritance equalization, or the promotion of the ease of asset distribution. Consequently some will allow, even in the absence of traditional justification, an amount of coverage determined as a percent of the total estate, the number varying among receptive carriers. Existing coverage is taken into account.
 
So don’t just throw an app up against the wall.
 
You must know the sympathetic carriers and be able to state a purpose for coverage other than “to increase the legacy.” Those words were used in the title only to get your attention. If you use them on an app they will surely get the attention of an underwriter, but not with beneficial results.
 
Give us your client’s situation and let us informally financially shop your case. When submitted the stated purpose will be “see attached cover letter” which we will write for you based on prior conversations with the underwriter.
 
It is worth the time. The coverage is on an older client utilizing a permanent product, a sale that will result justifiable compensation for your extra effort.
 
Both The Rolling Stones and the Bach Choir are still with us. Jumpin’ Jack isn’t as Flashy as he once was. But the Choir rolls on even expanding its footprint in the world of popular entertainment, participating in the soundtrack of movies like Robin Hood, The Chronicles of Narnia, Shrek the Third and Jack the Giant Slayer.
 
Call us with any older-client case you have at 706-614-3796 or tom@cpsadvancedmarkets.com. You just might find that what you need is what you want.
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It’s Time To Rethink Indexed Universal Life

Indexed Universal Life (IUL) isn’t just another permanent life product—it’s a modern financial tool built for flexibility, control, and client value. For advisors, it bridges the gap between protection and performance.

Today’s IUL designs offer more than tax-advantaged accumulation tied to market indexes—they deliver powerful living benefits your clients can actually use. Long-Term Care (LTC) riders provide access to death benefits while living, helping fund care without draining investment portfolios or forcing fire-sales of assets.

It’s real liquidity when life throws a curveball.

Return of Premium features add another layer of appeal.

Clients like the idea of “having options”—knowing their money can come back if priorities change. Combine that with Critical Illness benefits that accelerate funds upon diagnosis, and you’ve turned a death-benefit product into a comprehensive financial safety net.

For insurance agents, registered reps, and investment advisors, IUL offers something few other vehicles can: tax-efficient growth potential with protection against life’s biggest risks—all in one chassis. If you haven’t revisited IUL recently, it’s time. Your clients aren’t just buying insurance—they’re buying flexibility, security, and peace of mind.

Contact your Life Sales Associate for more information!

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Get ‘Credit’ For The Work You Do

A carrier’s underwriting assessment involves the review of the overall medical history and the application of crediting tools to improve upon and provide the best underwriting class possible.
 
Here is a case study that demonstrates how credits can make a difference in the sale, by reducing the premiums:
  • 54-year-old female
  • Applying for $1 million of term life
  • Has type 2 diabetes; treated with Metformin
  • Build is 5’3”; 220 lbs.
Initial work up Table 4.
 
But with credits for:
  • Lifetime non-smoker
  • Income of $100,000
  • Preferred or better driving record
  • Negative cardiac testing
  • Controlled blood pressure
Final offer is Table 2!
 
Do what’s best for your clients with health history. Contact our Underwriting Department for assistance with your impaired risk cases.
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Life Insurance Benefits In The Here And Now

In the world of aeronautics, the term envelope is used to describe the performance limits that an aircraft cannot safely exceed.  In his book The Right Stuff, Thomas Wolfe popularized the term pushing the envelope to describe the in-flight risks often taken by Air Force test pilots, particularly Chuck Yeager.

Business owners often ask if there are any tax-advantaged benefits they can provide for themselves through their company exclusive of employees.  The answer is, pretty much, “No.”

But overfunding a permanent life insurance policy has many attractive features and is an increasingly popular planning device.

On paper it is a simple executive bonus plan. 

Premiums that the business pays on the owner’s personal policy can be tax-deductible as compensation, but the same amount must be recognized as income on the owner’s W-2.  The policy is maximum funded each year without creating a modified endowment contract (MEC) to encourage as much cash value growth as possible.

Clients are often discouraged that the contributions are not deductible but usually reconsider when the plan elements are compared to another popular qualified vehicle, the Roth IRA.

Consider:

The temptation to push the envelope can occur in the insurance industry as much as in aviation.  Several precautions are in order when marketing and selling this versatile and effective concept:
  • Don’t refer to an over-funded UL plan as a retirement plan, or even a retirement plan alternative. It can easily lead a client to believe it is some sort of tax-qualified plan.  In addition, it overlooks accessibility to cash any time during the insured’s working life.
  • But if a major purpose of the plan is savings for post-retirement needs, make sure the client is taking advantage of any qualified plan opportunities available, including a personal IRA or a personal Roth IRA, if eligible.
  • As with any life insurance sale, make no guarantees, especially regarding policy account growth.
  • Again, as with any insurance sale, give proper attention to product suitability.
  • Illustrate acceptable sales ledger growth prospects and make sure the death benefit/premium balance will achieve optimum account growth. The usual design is a death benefit only large enough to accommodate the desired annual premium level without the creation of a MEC.

Contact tom@cpsadvancedmarkets.com or 706-614-3796 with questions about the use of overfunded UL in owner or non-owner benefit plans, and contact the Life Sales Team for sales ledgers.

For What It’s Worth: Some suggest that “pushing the envelope” derives from the practice of sliding a sealed offer across the table in a business transaction.  If unaccepted, one might say that progress on the deal becomes stationery.

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Increase Your Sales With This Fast Track Sales Tip

It’s common for advisors to jump to the solution before making sure their clients comprehend what is at stake should they get sick or hurt and not be able to work and provide an income.

The first step, and the most important, is conveying the necessity for income protection to your clients.

Start by finding out what’s paramount to them. The things your clients value the most require the most protection: Family, Home, Financial Plans, Secure Futures – help clients identify what they can lose should something happen to their ability to earn an income, and acknowledge that it’s a problem needing attention.
 
Financial Security: If the paychecks stop, how will they pay their monthly bills?
 
Few middle income families have enough savings to make ends meet if they should lose their income for more than a few weeks. When the paychecks cease, monthly bills will begin to deplete savings – setting back plans or priorities, perhaps even for years. For these clients, the definition of income protection is about knowing they can meet their financial obligations and protect their future plans.
 
Supporting the Family: What changes will they face?
 
On top of losing a paycheck, a disabling illness or injury can mean changes for the whole family. Plans are put on hold, routines are changed, family members must pitch in more – and the calendar fills with doctor’s appointments, which leads to more medical bills, and the urgent question becomes, “When will things get back to normal?” It’s important for them to know there’s a way they can still support their families and keep life as normal as possible if they become unable to work.
 
Focus on Recovery: How will they recover if the stress of finances is haunting them?
 
The last thing someone needs when they’ve experienced a disabling illness or injury is the stress of worrying about bills and other financial obligations while they recover. It’s difficult enough to be facing an uncertain future without the constant worry of financial set-backs – it’s important to know they’ll have a plan in place and monthly Disability Insurance benefits which will help keep things on track, so they can focus on getting well.
 
Contact your Disability Income Sales Rep for guidance – we’ll help you identify the best solution for each of your clients’ needs.

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