Bruce Beaty, RICP, VP Asset Business Consultant
It’s interesting how Life Insurance has evolved into a “multi-tool”. Most of what we see this month is focused around the most well-known feature of life insurance, which is the death benefit. However, we have seen life insurance used in a plethora of other applications. Deferred compensation, tax-free retirement, an alternative solution to traditional long-term care, a college funding vehicle, a get-out-of-debt strategy, a store of value, and a creditor protected safe haven. We have seen uses that allow it to act as a proxy for disability and a wealth transfer vehicle. We see parents pay premium on kids’ policies and the other way around. Corporations buy it, business partners buy it, and banks buy it too. We used to even see strangers owning life policies on others. We see banks lending the premium and companies being the beneficiaries. So not to beat a dead horse but….
Life insurance is very flexible and can be used to fulfill many visions and goals. Today we have a new option available designed to help clients get through tough times. The Cares Act allows our pre-59 ½ clients to pull money out of an IRA or other qualified account and forego the pre-59 ½ ten percent penalty (excise tax). They can also spread the tax impact over three years (or pay it back). This reminds me of when we could do a Roth Conversion and spread the taxes over three years. I’ll bet many who didn’t take advantage of that opportunity wish they would have.
The article, “Have You Opened your Gift from the CARES Act Yet,” by producer, Jay Beattey, explores a new resource that may be available to your clients for a limited time only. Perhaps it’s time to rectify an overfunded 401(k) situation for your clients, to create a tax-free bucket, and/or to create leveraged death and living benefits? Looking for a source of funding for a Kai-zen? This may be your solution. Ed Slott is calling Life Insurance the new Stretch IRA. Maybe it time to explore the full range of diverse applications that the “multi-tool”, known as life insurance, offers, and also time to check out the power of de-funding the over funded 401(k). You have until 12/31/2020 so don’t wait! Make sure you explore the Asset Exclusive Planning Compass to assist in comparing your options, or give our knowledgeable life team a call to discuss options and case design for your clients (888-303-8755 x2160).