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Incompetency Planning

When the fat lady sings… As they say, “It’s not over until then.”
 
There is a comedian who likes to inform his audience that it is his goal to live forever. Looking out into the crowd he adds, “So far, so good!” But the fact is that death is the one contingency everyone can be pretty sure will occur at some point.

There is a tendency in the planning process to focus on the matters of final arrangements, like wills and life insurance, and not give proper attention to the possibility of incapacity prior to death.

Different Types of Incapacity
 
The inability to handle affairs may be caused by something other than mental incompetency. Conducting business or carrying out activities may be impractical because of the onset of temporary or permanent physical infirmities, or geographic absence due to travel or distant residence.
 
Give thought to delegation of authority in circumstances other than those involving mental incapacity.
 
Financial Concerns
 
The document for delegating authority in financial matters is a power-of-attorney. It can be as narrow or as broad as needed. It can in force until revoked, or it can take effect under particular circumstances and can remain valid even into a period mental incompetency.
 
Revocable living trusts, often used to keep assets out of the probate court, can also give authority over property in the trust to a co-trustee or contingent trustee.
 
Beware of joint ownership as a solution! The responsibilities of joint owners is undefined and transactions with certain assets, such as real estate, may not be possible without agreement of all owners. Also, creation of joint ownership may create gifting concerns.
 
Medical Concerns
 
Planning documentation will go under various forms and names in different states (e.g. health-care directives, living wills, health proxies, medical power-of-attorney), but if properly drafted should address three items:
 
  • Direct who will make health care decisions when needed for the principal.
  • Indicate who will make any life-sustaining or life-ending decisions necessary.
  • Grant HIPAA authorization for decision-makers to receive all medical information necessary without the consent of the principal.
The process should also include proper risk management planning giving consideration to the advisability and feasibility of long-term care and disability insurance options available.
 
Whom Do You Trust?
 
All the documentation is fine, but it is only as good as the qualifications and reliability of the attorney-in-fact, trustee, or other fiduciary chosen to carry out the terms.
 
Good starting points for candidates include:
 
  • Their geographic location – Will they be on-site when needed?
  • The intensity of their lifestyle – Will they have time to attend to their responsibilities?
  • Experience – Do they have the background and skills to handle the affairs they will oversee?
All this, of course, in addition to whether they have proven trustworthy and dependable in the past.
 
The importance point to impress upon a client regarding incompetency planning is that if they don’t make a plan the State will make one for them. Through tedious, drawn-out and expensive guardianship or conservatorship hearings a court of law will set a course that may or may not achieve what the client might have desired, administered by people the client may or may not have preferred.
 
Contact Tom Virkler, JD, CLU, Director of Advanced Markets, at (706) 614-3796 or tom@cpsadvancedmarkets.com with basic questions and concerns that each client should consider taking to their legal advisors, as well as for information on the long-term care and disability insurance options that can assure that proper funding is available to carry out the intentions of your clients in the unfortunate event of incompetency.
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An Affordable Alternative To Estate Planning For Hesitant Clients

In today’s economy, some of your wealthier clients may be hesitant to purchase Survivorship Life Insurance coverage due to uncertainty, either in the market, estate taxes or their family’s circumstances. There is another way to cover their insurance need without the finality of a Survivorship plan or the cost.

We have contracts with carriers who offer the ability to convert Individual Term Insurance policies into a Survivorship plan during the designated conversion period.

Your clients receive immediate insurance protection while locking in their underwriting class. This approach requires less of a commitment coming out of your client’s checkbook while satisfying the total insurance need.
 
The policies can be owned individually or by an Irrevocable Life Insurance Trust (ILIT) and down the road they will have the ability to convert into a SUL plan at attained age if the uncertainty regarding estate taxes and the current market condition erodes.
 
Items to keep in mind when considering using an ILIT to purchase Term coverage.
 
First, if you use a trust, the individual who is not covered by the Term policy will need to provide evidence of insurability when the policy is converted to a SUL plan. Second, you could have the trust purchase half of the total insurance need on each spouse.
 
Using this method, the individuals will be able to acquire the total insurance need without showing proof of insurability at the time of the policy change.
 
If you have clients who are hesitant to address their estate planning needs and are taking a “wait and see” approach, you may want to introduce this strategy.
 
Our Life Sales & Marketing Associates can show you which carriers Term policies can participate in this concept and prepare quotes showing the most affordable options.
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A Sweeter Deal – Impaired Fasting Glucose

In the years leading up to the development of Type 2 diabetes, most individuals go through an asymptomatic condition called pre-diabetes. During this time, fasting blood sugar levels may be slightly elevated and there may be other signs of disruptions in normal metabolism, such as high triglycerides, low “good” (HDL) cholesterol levels and excess fat around the abdomen.
 
Approximately 1 out 3 American adults have pre-diabetes. When caught at an early stage, it is possible to head off development of Type 2 diabetes with diet changes and weight loss.

One of our A+ carriers can underwrite favorably on pre-diabetes cases that show a stable, well controlled condition.

Take a look at this case study:
Male, 55 years old
Non-Smoker
Seeking Personal Coverage
 
  • History of hypertension that has been well-controlled with medication and exercise.
  • Two years ago, a routine annual check-up revealed a blood sugar reading that was higher than normal.
  • Follow up glucose levels remained elevated (in the 100-103 range), but never high enough to suggest outright diabetes. He was then diagnosed with Impaired Fasting Glucose.
  • His doctor suggested exercise and a change in diet to include reduced carbohydrate intake.
  • Has done well with his new diet and exercise regimen; ongoing lab testing has shown no progression in his condition.
This client had the beginning of pre-diabetes caught early by routine testing. Because he responded well to dietary changes and exercise, this condition has not progressed and he is at lower risk of developing diabetes in the next several years — if he maintains his new, healthy habits.
 
Potential Underwriting Outcome: Super Standard Non-Tobacco, with potential improvement to Preferred using this carrier’s Healthy Lifestyle Crediting Program.
 
Call your Life Underwriting Team to discuss your client’s medical history today and let’s work on your next success story!
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Protecting Those Who Care For Others

Women often try to find the right balance between juggling careers, spending time with family, and caring for loved ones.

With women living longer, and providing more caregiver services, they become more vulnerable to long-term care issues.

Now is the perfect time to increase your focus on existing and potential female prospects to expand your LTC Insurance business.
 
How You Can Help
 
Women may spend their entire lives taking care of other people. You can help them create strategies to plan for their future and help protect their retirement assets. An LTC Insurance policy can help protect their assets and help them maintain independence in the future.
 
To increase your reach and help your female clients take the first step to long-term care planning, consider these scenarios:
  • Married Couples: Husbands often need care first, leaving less assets for the wife to use for her own care. Review your clients’ long-term goals to ensure both parties have a care plan for the future.
  • Same-Sex Couples: Current financial planning rules can make it tricky to access a partner’s assets when care is needed. Help your clients design a plan to share each other’s benefit dollars.
  • Widowed/Divorced: When a woman becomes divorced or widowed and has no children, there may be no one to take care of her. Almost 70% of women age 75 or older are widowed, divorced, or never married, compared to only about 30% of men. Explain to your female prospects the value of Long-Term Care planning and how a policy can help them protect their future.
  • Adult Children of Aging Parents: In helping adult children with their own LTC planning, they can purchase coverage and have access to our Caregiver Support Services Benefit, which is a great source for advice and helpful information should a long-term care event arise for an uninsured family member, especially Mom.
Reasons to Plan
  • Nearly 60% of LTC Insurance policies are issued to women, indicating that women are acknowledging the need for care.
  • 79.1 years is the current life expectancy for women. The current life expectancy is 73.2 years for men.
  • For every 100 men in U.S. nursing homes, there are approximately 178 women. 
Expand Your Target Market
 
Look for local women’s organizations in your area and consider hosting an LTC planning seminar to educate women on the risk of not having a plan and the comfort of having one.
 
Contact Us
 
Our expert team can offer advice on discussing Long-Term Care with women and how to approach their concerns. Contact us today to learn more.
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7 Ways To Fast-Track Your DI Sales

Everyone knows how hard insurance professionals work to prospect, set appointments, complete the fact-finding process, run quotes, close the deal, fill out and send in forms all just to submit a single Disability Case.

The last thing you want is for an application to be held up in underwriting because information may be incomplete or worse yet, declined because of medical issues.

It’s important to remember that the information required by underwriters helps the insurance company manage risk, which in turn helps to keep prices and products competitive across the market.
 
Here are 7 ways you can help your cases move through underwriting faster and more efficiently:
  1. Before moving forward with an application, know your client. Take the time to ask about their medical history, health concerns, and current medications. If there are red flags, allow our Underwriting Department go to go to work for you. We can pre-screen the client and direct you to a carrier that might be lenient with that particular medical concern.
  2. Answer all questions on the application and provide full details such as occupation and job duties as well as physician name, address and phone number. Make sure all required fields are completed. Incomplete apps may delay your case.
  3. Send a copy of the most recent illustration reflecting the correct occupation class, benefits, discounts and premiums.
  4. Attach all necessary financial documentation.
  5. When possible, submit the case for simplified underwriting with no blood, urine, EKGs, or APS required. Typically, if the client is between the ages of 18-50 and looking for a monthly benefit amount up to $10,000 this is the way to go. This program averages a 48-hour turnaround time once the application and TeleApp interviews are competed and received.
  6. While not required, it’s always helpful to attach a cover letter that discusses the details of the particular case. This helps to give the Underwriting Department a clear picture of the case, particularly if there are any unusual medical concerns or job occupation descriptions.
  7. You can complete the telephone health interview at any time. The application does not have to be in-house for the phone interview to be conducted and typically takes less than 20 minutes.
The tips on this list will save you valuable time and help you grow your business.
 
Contact your dedicated Disability Specialist today to learn more about how you can streamline the underwriting process!
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A Transfer-For-Value Will Only De-Value

Little Harold ran into the kitchen where his Mother was preparing dinner and said, “Hey Mom! You know that antique vase on the stand in the front hall that has been handed down from generation to generation?” When she looked up he reported, “Well my generation just dropped it!”

The transfer of valuable assets must be done with care. And so it is with life insurance handed down or handed off through a change of ownership.

Long before the life settlement prairie fire swept across the industry landscape, Congress was concerned about the practice of brokering in the lives when no true insurable interest existed. Section 101 of the Internal Revenue Code doesn’t prohibit the purchase of a policy, but it does curtail the tax advantages of such an “investment” to an extent that could be significant to the unsuspecting.
 
In A Nutshell
 
Death proceeds are not includible in gross income (i.e. they are income tax-free) unless the policy was acquired for “valuable consideration”, then they are excluded only to the extent of the consideration paid (basis). And consideration doesn’t have to be cash. The IRS will go far afield in construing any hard or intangible assets, services or other benefits rendered in the acquisition of the policy as consideration. There are some common exceptions. Most business-related TFVs are protected if they occur between partners or their partnership (LLCs taxed as a partnership are considered partnership), or if the transfer is to a corporation in which the insured is a shareholder or officer. Most transfers within a domestic situation are not affected because they are considered gifts.
 
Beyond that attorneys and accountants must struggle with the “gray areas” that always gather like a fog around the real life situations addressed by the letter of the law. The two most common scenarios we encounter follow with a description and our best guess as to the response that a qualified advisor might give:
 
Collateral Assignments
 
The regulations to IRC 101 state that “the creation, for value, of an enforceable contractual right to receive . . . proceeds of a policy may constitute a transfer for a valuable consideration . . . [but] the pledging or assignment of a policy as collateral security is not a transfer for a valuable consideration . . .” Consequently, use of a policy to secure a loan is not a TFV. But an assignment for some other reason may be.
 
Beneficiary Changes
 
There are several reasons it may not be wise to make someone a beneficiary in return for some consideration, but a potential TFV problem is probably not one of them. Again, the regulation states there must be “an enforceable contractual right to receive . . . proceeds of a policy”. A revocable beneficiary change does not create such a right.
 
Fortunately there is a “fix” for policies tainted by a transfer-for-value. Unlike the family vase (pronounced vahze if you are in good company), this is a Humpty-Dumpty that can be put back together again. The regulations have two pieces of good news. First, a transfer back to the insured is never a TFV and, second, it is only the last transfer that governs taxable status. It may be possible to cleanse the troubled policy with a transfer back to the insured and then work forward from there.
 
Contact Us
 
Contact Tom Virkler, JD, CLU, Director of Advanced Markets, at (706) 614-3796 or tom@cpsadvancedmarkets.com with any concerns you have about the tax results of transferring ownership of an existing policy, or if you need help rescuing one from the grip of potentially taxable proceeds.
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No Adverse Underwriting For Family History Of Cancer

Family history of cancer can have an adverse impact on underwriting decisions despite a client’s own personal history of excellent health.

While most carriers limit eligible rate classes for this particular family history, there are still a couple of A+ carriers that do not underwrite family cancer histories at all.

This means a client with a family history of cancer can still qualify for all of the Preferred Rate Classes, including Best Class.
 
In addition, there are other carriers who disregard family history of opposite-gender cancers, such as, a male applicant whose mother died from uterine cancer or a female applicant whose father died from prostate cancer.
 
Let our Underwriting Team help you get the best offers for your clients with family history of cancer! Call us today.
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Are You Asking The Right Questions?

Bringing up the subject of Long-Term Care (LTC) Insurance is not always easy, but changes may have happened in your clients’ lives that make this the year to talk about LTC.

The annual financial review is a great time to discuss changes that may have occurred over the past year, and proactively plan in anticipation of events that may impact the success of meeting set goals.

Here are six easy questions you can ask to help get the conversation started:
  • Have you incurred additional expenses because a family member or friend needed care?
  • Have you needed to adjust your work schedule due to a family member or friend requiring supervision or assistance with activities of daily living?
  • Have you recently moved a parent or loved one into an assisted living facility or nursing home?
  • Have you recently become an empty nester?
  • Are you preparing for retirement?
  • Are you concerned with the government changes in healthcare and its inability to deliver a long-term care plan?
A ‘yes’ answer to one or more of those questions should help your clients realize that planning for an extended health care event with a long-term care policy makes sense. In fact, long-term care is not getting old or living in a nursing home – it’s about receiving the care you want, when you need it.
 
Proper planning will ensure your clients won’t have to depend solely on family or friends for unpaid care, or spend down most of their assets to qualify for government assistance. The benefits of a long-term care policy will help cover the costs of the care.
 
Long-Term Care Insurance provides security to families in the event of an untimely health event. Get the conversation started by asking your clients the right questions at their annual review. As a result, you may discover changes in health or planning opportunities based on anticipated needs.
 
Make certain your clients have the right LTC plan in place to meet their needs. Contact your LTC Sales Rep for more information.
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Why Small Businesses Need Business Overhead Expense Coverage

Many small-business owners fail to understand how difficult it would be to stay operational if they were disabled and unable to run their business.

The impact of a small-business owner’s disability does not just affect the business itself, but the employees as well.

Protect both the business and staff with Business Overhead Expense (BOE) coverage.
 
The majority of small businesses are tight-knit families, who rely on each other for support. If the business is unable to produce in the absence of the owner, the employees may have to start looking for alternative employment opportunities and the business would be at a high risk for closure.
 
The BOE Answer
 
The need is simple to set up: Small businesses typically cannot survive without consistent production – so what happens when the owner is the primary producer of the business’s revenue and is unable to work?
 
A BOE plan would keep the business in operation in the event the owner becomes disabled and couldn’t work for a period of time. BOE coverage reimburses all the fixed expenses, including the employees’ salaries, back to the business. In addition, a BOE plan allows for up-front tax deductions of premiums when insuring for the potential disability of the self-employed person. Often, small business owners are candidates for short-term and/or long-term DI as well.
 
BOE policies are typically short term, with benefit periods from 12 to 24 months and a 30 or 60 day waiting period before benefits are payable – this keeps the premium low and very affordable.
 
We feature carriers offering BOE benefits of up to $25,000 per month with no exam, lab tests, or tax returns. A policy can be issued within 48 hours after the completion of a short application and client telephone interview.
 
Speak with your small-business owner clients today to see how you can help them protect one of the most important assets they have – their business.
 
We’re ready to start work on your clients’ BOE planning – contact your Disability Income Marketing Managers today.
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New Research Points To 3.7% As The Updated Safe Withdrawal Rate – But There’s A Smarter Way To Generate Retirement Income

Morningstar’s recent study suggests that the safe withdrawal rate for retirees has now shifted to 3.7%. For a 60-year-old with a $5 million portfolio, that translates to an annual withdrawal of $185,000 — offering a solid chance that the portfolio will last through retirement.

But is there a way to ease the burden on the income-producing portion of a retirement portfolio while preserving longevity? And what are the potential advantages of doing so?

Top advisors are turning to Fixed Indexed Annuity (FIA) income riders to help meet these goals.

More importantly, you don’t need to replace all income with annuities to reap the benefits. Even a partial allocation can have a major impact. For example, by allocating just 27% of the portfolio — $1,340,580 — toward a top-performing FIA income rider, clients can generate about half the income ($92,500 per year) they would from the entire $5 million portfolio. This portion is guaranteed for life, removing uncertainty around at least half of the retirement income.

Contrary to common misconceptions, this strategy can actually enhance liquidity in the overall portfolio.

While annuities are long-term vehicles and not known for liquidity, the reliable income they provide can allow other parts of the portfolio to remain more flexible.

Additionally, with a portion of income secured, clients may feel more comfortable taking on additional market risk in the rest of their portfolio — potentially capturing higher returns. Monte Carlo simulations support this strategy, showing improved outcomes when these guaranteed-income tools are included in the broader retirement plan.

Partner with us on your next income planning case.

We can help generate a personalized income portfolio report for your client, showcasing how FIAs with income riders offer one of the most efficient income-generating solutions available today.

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