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1 For Producer Use Only. Not for Use with the Public. Insurance Planning in the New Economy American Taxpayer Relief Act of 2012...and the Opportunities!

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Presentation on theme: "1 For Producer Use Only. Not for Use with the Public. Insurance Planning in the New Economy American Taxpayer Relief Act of 2012...and the Opportunities!"— Presentation transcript:

1 1 For Producer Use Only. Not for Use with the Public. Insurance Planning in the New Economy American Taxpayer Relief Act of and the Opportunities! The Good The Bad The Ugly...

2 2 For Producer Use Only. Not for Use with the Public. Important information American General Life Companies, is the marketing name for a group of affiliated domestic life insurers, including American General Life Insurance Company (AGL) and The United States Life Insurance Company in the City of New York (US Life). Please note that AGL and USL are solely the providers of the insurance products. The companies, their employees, agents, representatives, and affiliates do not provide tax, legal, or financial advice. The intent of this presentation is to communicate the potential benefits of several insurance and estate planning strategies. It is not an exhaustive list of possible advantages and disadvantages for each strategy. It is important to understand that, although every effort was made to ensure the accuracy of the information, the presentation is strictly for illustrative and educational purposes only and no representation or warranty, express or implied, is made by AGL or USL as to the accuracy or completeness of the information. All sample scenarios are hypothetical and software was used for some of the calculations. Many values were rounded to aid in presentation. To determine whether a strategy described herein is appropriate for a client’s situation, refer the client to his/her own tax, legal and financial advisors. Each agent should verify the accuracy and reliability of the information (federal income tax statutes, rulings, and regulations contained in this material may have changed since this presentation was created). AGL and US Life shall not be liable for any loss or damage caused by the use of, or reliance on, the tax and legal items contained in this material. To ensure compliance with requirements imposed by U.S. Treasury Regulations, we inform you that any tax advice contained in this presentation (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. ©2013. All rights reserved. AGLC REV0813

3 3 For Producer Use Only. Not for Use with the Public. We will discuss  Dealing with the changes Congress has delivered  How to approach all clients and potential clients  Need for life insurance policy review (and audit)  Life insurance sales opportunities

4 4 For Producer Use Only. Not for Use with the Public. The Good  “Fiscal cliff” avoided  ATRA signed January 2013  “Permanent” tax law

5 5 For Producer Use Only. Not for Use with the Public. The Good  “Fiscal cliff” avoided  ATRA signed January 2013  “Permanent” tax law The Bad  The process  The “pork”  Omissions

6 6 For Producer Use Only. Not for Use with the Public. The Good  “Fiscal cliff” avoided  ATRA signed January 2013  “Permanent” tax law The BadThe Ugly  The process  The “pork”  Omissions  All income taxes are increased

7 7 For Producer Use Only. Not for Use with the Public. Great opportunity abounds – The broad view Clients’ interest heightens even when tax change does not affect them

8 8 For Producer Use Only. Not for Use with the Public. Opportunity 1 Survivor income factors  Increased income taxes for all  The prospect for higher inflation rates in the future  Decreased interest rates paid on savings

9 9 For Producer Use Only. Not for Use with the Public. Opportunity 1 5% Account 2007 Plan in 2013 Becky Amt: $56K/yr Inflation Adj.: 4% Duration: 20 years Terry Terry’s $1M Policy At Terry’s death, policy pays $1M 2007 Plan Becky Amt: $50K/yr Inflation Adj.: 3% Duration: 45 years Terry Terry’s $1M Policy 7% Account At Terry’s death, policy pays $1M New Coverage Needed: $800K Current rates make coverage inadequate

10 10 For Producer Use Only. Not for Use with the Public. Opportunity 1 Where client meeting may lead For Advisor Use Only. Not for Use with the Public.  Policy review on adequacy of principal (death benefit) to support spouse and children  Review of coverage for “Dual Income” (DINC) households (to replace income, pay for child care)  Beneficiary Review for prospective clients

11 11 For Producer Use Only. Not for Use with the Public. Opportunity 2 Income tax future uncertain Taxed Never Taxed LaterTaxed Now 1The deductibility of an IRA contribution may be phased out if you or your spouse has access to a qualified plan at work. 2Cash value life insurance policies are subject to Modified Endowment Contract rules that discourage over funding based on face amount, insured's age and other factors. Consult a policy illustration for details.

12 12 For Producer Use Only. Not for Use with the Public. Opportunity 2 Income tax future uncertain

13 13 For Producer Use Only. Not for Use with the Public. Opportunity 3 Higher taxation on the sale of appreciated assets

14 14 For Producer Use Only. Not for Use with the Public. Opportunity 3 Higher taxation on the sale of appreciated assets 5% Account Current Plan: Sell a $2M Asset with a basis of $250K Children $500K in Federal & state taxes $1.5M net sales proceeds $75K/year $1.5M at death Married Couple

15 15 For Producer Use Only. Not for Use with the Public. Opportunity 3 Higher taxation on the sale of appreciated assets Proposed Plan: Fund CRUT and WRT Children $1.5M at death Married Couple 5% CRUT Invests proceeds from sale WRT $290K tax benefits $2M stock portfolio $100K/year Gifts $18K/year CHARITY $2M at death

16 16 For Producer Use Only. Not for Use with the Public. Opportunity 3 Higher taxation on the sale of appreciated assets The Results:

17 17 For Producer Use Only. Not for Use with the Public. Opportunity 3 Factoids  Joint and survivor income  Can be one’s own trustee  More income to client  Create money to pay premium (individual or survivorship life insurance)  Greater inherited wealth  Can choose and change charities

18 18 For Producer Use Only. Not for Use with the Public. Opportunity 3 Where client meeting may lead Large life sale for wealth replacement Life Insuranc e Policy

19 19 For Producer Use Only. Not for Use with the Public. Opportunity 4 Gift asset to child in lower tax bracket Gift of Capital Asset  Lower capital gains rate  Investment return taxed at lower rate  Discounted after-tax dollars for life premiums Parents Children Sale of Capital Asset

20 20 For Producer Use Only. Not for Use with the Public. Opportunity 5 “Portability” use it or not? DSUEA – Deceased Spouses Unused Exempt Amount Decedent Spouse Surviving Spouse Unlimited marital deduction and (New law) DSUEA

21 21 For Producer Use Only. Not for Use with the Public. Why?  Save legal fee  Doubles Federal exemption  Gives surviving spouse control Why not? Beware  Not available for state estate tax  No creditor protection  No predator protection  Growth is taxable  Widow(er) can redirect assets  Increased state estate tax  Must file IRS 706 at first death (federal estate tax form) Opportunity 5 DSUEA: To use or not to use

22 22 For Producer Use Only. Not for Use with the Public. Opportunity 6 Estate Tax Planning is Alive and Well (especially in Hawaii, Connecticut, New York…)  For many clients, reduced or no federal estate tax  For some clients, increased federal estate tax  For some clients, increased state estate tax

23 23 For Producer Use Only. Not for Use with the Public. Opportunity 6 States with a state estate tax As of August 1, Non-resident Hawaiian property owners receive a $1,000,000 exemption. 2 On January 1, 2014, top rate increases to 20% and exemption indexed for inflation. Reminder:No portability for state estate taxes STExemptionTop Rate CT$2,000,00012% DC$1,000,00016% DE$5,250,00016% HI 1 $5,250,00016% IL$4,000,00016% ME$2,000,00012% MD$1,000,00016% MA$1,000,00016% MN$1,000,00016% NJ$675,00016% NY$1,000,00016% OR$1,000,00016% RI$910,72516% VT$2,750,00016% WA 2 $2,000,00019%

24 24 For Producer Use Only. Not for Use with the Public. Opportunity 6 States with a state estate tax

25 25 For Producer Use Only. Not for Use with the Public. Opportunity 6 States with a state estate tax

26 26 For Producer Use Only. Not for Use with the Public. Opportunity 6 Where client meeting may lead  Need for survivorship policies  Adequacy of survivorship policies  Need for additional single life coverage  The “economics” of existing coverage  Review of ownership & beneficiary designation

27 27 For Producer Use Only. Not for Use with the Public. Insurance Planning in the New Economy

28 28 For Producer Use Only. Not for Use with the Public. Thank you


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