I’m sure you have many relationships where your clients are already retired and they have assets that are above what is needed to sustain lifestyle or income need – true legacy assets. We worked with one case just like this for an advisor to maximize a legacy plan. First consideration was a second-to-die life insurance plan and second was Roth Like IUL Accounts for the kids. If you are not putting these ideas in place for your clients, who are doing OK financially and have good health, then you are really missing the boat.
This couple: Ages 62 and 61 had $165,000 in an ILIT and were adding $17,000 annually. The ILIT was funding two 30 term policies of $1,500,000 for him and $1,000,000 for her. They set this up 7 years earlier at age 55. So the term would only take them to age 85. Their new Financial Advisor and the Estate Planner on his team recommended closing the ILIT because they only had a net worth of just over $2,300,000 and they had pension and rental income with cost of living adjustments (COLA).
We looked at many options and decided on recommending that the $165,000 be moved into a $2,000,000 second-to-die policy with an additional annual premium of $13,691. This was Guaranteed UL to age 120.
Guaranteed IRR (taxable equivalent) at death of second life from Prudential (A+) SUL.
At age 90 8.92%
At age 95 7.11%
At age 100 5.78%
At age 105 4.95%
Very tough to beat those numbers, especially when you can use the word Guaranteed.
Second Piece of the Puzzle was the Goal of Helping the Kids. Goal to gift $100,000 to each child over time. Recommended solution IUL:
Summary of Index Universal Life illustrations for kids:
Daughter (nearest age 25) ($5,000 X 20 Years = $100,000 deposited)
$1,252,359 Estimated Account Value at age 70
$120,612 Estimated tax free annual supplemental retirement income at age 70
$1,325,526 Estimated Life Insurance at age 70 (initial $307,037)
Son 1 (nearest age 30) ($5,000 X 20 Years = $100,000 deposited)
$874,396 Estimated Account Value at age 70
$83,230 Estimated tax free annual supplemental retirement income at age 70
$926,517 Estimated Life Insurance at age 70 (initial $179,888)
Son 2 (nearest age 32) ($5,000 X 20 Years = $100,000 deposited)
$756,080 Estimated Account Value at age 70
$71,966 Estimated tax free annual supplemental retirement income at age 70
$801,150 Estimated Life Insurance at age 70 (initial $166,212)
This couple was also highly considering that they would require their children to pay the premiums after year 10 so they would have some discipline and skin in the game.
Do you wish you had parents like this?
Hopefully these ideas will get your juices going and thinking of clients where you can add real additional value to their family with protection and legacy strategies.