Personal Needs Business Needs Estate/Wealth Transfer Planning

Transcription

1 STEP 1: ASK YOURSELF WHY YOU NEED LIFE INSURANCE. Personal Needs Business Needs Estate/Wealth Transfer Planning Replace lost income from the premature death of a wage earner Pay off debts, mortgage, funeral epenses or prefund college Provide funds for childcare or a special needs child Protect future insurability Provide for long term care epenses or income needs during a life emergency Supplement retirement income through ta deferred cash value Provide support for a divorced partner Collateralize business loans Develop a buy/sell plan that enables you to buy a deceased partners s business share Keep business from being adversely effected if key person dies Retain key employees with life insurance as a benefit Facilitate any Employee Stock Ownership Plan (ESOP) repurchase obligations Transfer assets (using annuity, IRA, etc. income to fund insurance and offset inheritance taes) to children or grandchildren Fund a bequest to a favorite charity Stream income transfers from required minimum distributions (RMDs) Equalize inheritances for heirs Pay legal, administrative fees and/ or taes on estate settlement STEP 2: PUT A NUMBER ON THE LIFE INSURANCE NEED. 1. Annual earned income your family/business would need if you died Include all sources of income. 2. Total income multiplier (Multiply the appropriate age factor by line 1.) Factor represents the number of years for which funds would be needed. Age Age Age Age Age 61 & up 20 line 1 16 line 1 12 line 1 8 line 1 5 line 1 3. Funeral and other final epenses Can range between $10,000 to $20, Mortgage and other outstanding debts Includes mortgage, credit card debts, car loans, home equity, etc. 5. Education epenses 2014 average annual college costs 1. $19,000 (4 Year In-State), $32,000 (4 Year Out-Of-State), $41,000 (4 Year Private). Child 1 Child 2 Child 3 Annual Amount # of Years in College Total Cost ($) Total capital needed= 6. Total income required (Add lines 2, 3, 4 and 5.) 7. Savings and investments Bank accounts, CDs, stocks, bonds, mutual funds, real estate/rental property, etc. 8. Retirement savings IRAs, 401(k) plans, SEPs, pension and profit sharing. 9. Present amount of life insurance Include group and personal insurance. 10. Total of all assets (Add lines 7, 8 and 9.) 11. Other assets: Pension, Social Security, etc. 12. Total income replacement (Subtract line 11 from line 10) 13. Estimate amount of additional life insurance needed (Subtract line 12 from line 6.) 1 Based on 2014 values available on CollegeBoard.com 1. $ 2. $ 3. $ 4. $ 5. $ 6. $ 7. $ 8. $ 9. $ 10. $ 11. $ 12. $ 13. $ Legal & General America LAA2091, Page 1. Not valid without full disclosure.

2 CHOOSING STEP 3: DETERMINE COVERAGE WHAT FOR TYPE OF LIFE THE LIFE INSURANCE WORKS NEED. FOR YOU. Term or permanent? What s right for you? Start here: How long do you want your life insurance policy to provide coverage? Term Insurance: Coverage for 10, 15, 20, or 30 years with a level term guaranteed premium. Beneficiaries will receive the death benefit payment if you die during the coverage period. Permanent Insurance: Coverage for your entire life. Beneficiaries will receive the death benefit payment when you die. What type of permanent insurance should you purchase? What term insurance should you consider? Do you want the paid premiums to be refunded to you at the end of the coverage period? A traditional term product will provide life insurance protection for the most cost effective coverage for 10, 15, 20 or 30 years. At a higher cost, a return of premium product will allow for your premiums to be returned if the premium period is outlived. A product that provides a basic death benefit, with no cash value accumulation. A product that can potentially accumulate a cash value. Do you want to make decisions about how the money will be invested? Want more information? Contact your financial advisor. Yes. As the policyholder, you will decide where to allocate the premiums. Certain types of universal life products allows you to control the cash value allocations into different accounts. No. The life insurance carrier will decide where to invest. A universal life or whole life product provides the ability to select how much to invest while gaining a potential cash value. Legal & General America LAA2091, Page 2. Not valid without full disclosure.

3 STEP 4: ONCE YOU HAVE A POLICY, REVIEW IT ANNUALLY. Does your portfolio contain a life insurance policy that has never been reviewed? Reassessing your current coverage against immediate and long-term financial goals will determine if the insurance meets your protection needs. Life insurance products continue to evolve and you may be unaware of new or additional features that have little or no cost. ASK YOURSELF... Is your term policy about to epire? Do you still need life insurance? If so, your policy may be renewable but the premiums may significantly increase after the level term period is over (i.e., after the 20th year of a 20-year term policy). Should you buy a new one? Does your term policy have a conversion option? Did you buy a term policy with plans to convert it to a permanent plan without eams or eligibility reviews - just to protect your insurability? What is the coverage guarantee on your policy? With a term plan, coverage is guaranteed for the policy term. Some permanent plans however, only provide coverage to age 90. Or sometimes only to age 80. It makes good sense to find out the coverage guarantee on your policy. It s not news that people are living longer lives. Has your life changed lately? Need to change your coverage or beneficiary? Changes that affect your financial well being, such as a new job, inheritance or retirement, are all reasons for a coverage review. An addition to the family, change in marital status, special needs children, kids moving out or parents moving in can all affect your coverage needs. Does your policy give you access to cash value? Did you purchase life insurance to supplement your retirement income with ta-deferred cash value growth? Are you facing a life emergency or terminal illness and need access to that money for day-today living epenses or unepected bills? Does your policy have an accelerated death benefit? Does your policy work in concert with your estate or trust plans? This is a good time to make sure you have a written plan for the death benefit payout. This is especially important if you have a life insurance trust; the most common of which is an Irrevocable Life Insurance Trust (ILIT). If you own one of these trusts, please consult a ta advisor. Do you want the state to determine who your children live with or how your estate is distributed? Do you own a business or have a business continuation plan? The annual review is also very beneficial for small businesses. A review can help avoid problems with valuation of the business if there are changes in eecutive staff, etc. Death benefits from policies designed to cover business needs are subject to IRC 101(j). Death benefit proceeds will be taable unless eemption rules are met. One requires the covered employees to sign Notice and Consent forms prior to policy issue. Legal & General America life insurance products are underwritten and issued by Banner Life Insurance Company, Urbana, MD and William Penn Life Insurance Company of New York, New York, NY. Banner products are distributed in 49 states and in DC. William Penn does business eclusively in New York; Banner does not solicit business in NY. Insurance policies contain eclusions, limitations, reductions of benefits and terms for keeping them in force. A licensed financial professional can provide costs and complete details. This piece has been designed to provide general information in regard to the subject matter covered. It should be used with the understanding that we are not rendering legal, accounting or ta advice. Such services should be provided by the client s own advisors. Accordingly, any information in this document cannot be used by any tapayer for purposes of avoiding penalties under the Internal Revenue Code. Securities and Insurance Products: Not Insured by FDIC or any federal government agency. May lose value. Not a deposit of or guaranteed by any bank or bank affiliate. LAA EVERY DAY MATTERS. BANNER. WILLIAM PENN.

4 SET YOUR GOALS. Does this apply to you? Check the boes then rank your priorities. ü # PERSONAL, PROTECTION, RETIREMENT NEEDS SOLUTION Replace lost income from the premature death of a wage earner. Pay off debts, mortgage, final epenses or prefund college costs. Provide funds for childcare or a special needs child. Protect future insurability. Provide for long term care epenses or income needs during a life emergency. Supplement retirement income through ta deferred cash values. Provide support for a divorced partner. Purchase TERM for the period until retirement to provide for family. Purchase TERM for length of time until college, enough money for final epenses, mortgage is paid off, etc. Purchase TERM until child is self sufficient or PERMANENT to replace parental support. Purchase TERM policy with PERMANENT conversion option as a young adult so insurability is protected, as health could decline over time. Purchase PERMANENT that offers cash accumulation with an option to borrow cash during an emergency. Purchase PERMANENT that offers ta deferred cash accumulation to support retirement savings. Purchase TERM to provide support for dependants during mandated divorce settlement period. BUSINESS NEEDS Collateralize business loans. Develop a buy/sell plan that enables you to buy partner s business share as an eit plan. Keep business from being adversely affected if key person dies. Retain key employees with life insurance as a benefit. Facilitate any Employee Stock Ownership Plan (ESOP) repurchase obligations. Purchase TERM for length of business loan, naming the business or loaning firm as the beneficiary. Purchase TERM when either the retirement or eit date is known. Purchase PERMANENT when the length of the buy/sell agreement eit date is unknown or the parties want to use the policy additionally for retirement/cash accumulation. Purchase TERM for epected length of employment. Purchase PERMANENT if the length of employment is unknown. Firm can purchase PERMANENT insurance on employees life who reach a certain length of employment and transfer policy ownership to the employee. Purchase PERMANENT on the owner where the death benefit is used to repurchase stock obligations and transfer ownership. ESTATE, LEGACY, WEALTH TRANSFER PLANNING Transfer assets to children or grandchildren using annuity, IRA, etc. income to fund insurance and offset inheritance taes. Fund a bequest to a favorite charity. Reduce estate taes via ta free benefit of life insurance in an Irrevocable Life Insurance Trust (ILIT). Stream income transfers from RMDs. Equalize inheritances for heirs. Pay legal, administrative fees and/or taes on estate settlement. Purchase PERMANENT to cover ta liability associated with transfer of assets to children or grandchildren. Purchase PERMANENT naming the charity as the beneficiary. Purchase PERMANENT and establish an ILIT that outlines the beneficiary and the death benefit payment schedule, providing the ability to pass the death benefit to the beneficiaries effectively. Purchase TERM or PERMANENT and match the required minimum distribution payments mandated by the IRS for annuities, IRAs, 401Ks and pensions with the insurance premium payments. Purchase PERMANENT and establish an ILIT, designating family members participating in the family business to inherit the business and non-participating members named beneficiaries of the life insurance. Purchase PERMANENT to cover ta liability, will eecution fees and the transfer of estate assets to the heirs. Want more information? Contact your financial advisor. Legal & General America LAA2092. Not valid without full disclosure.

5 LEARN THE LIFE INSURANCE BASICS. Term insurance is often best if you need: To send your kids to college To pay off mortgage or other debt To provide income replacement for survivors To buy more coverage on a budget Permanent insurance is often best if you are: An older adult with grown children Someone supporting retirement plans A business owner Interested in lifelong coverage and a cash value accumulation option What policy features and benefits make the most financial sense? Traditional term life insurance provides protection for a specific period of time; for eample, 10, 15, 20, or 30 years. With term insurance, you re generally just paying for the death benefit, the lump sum payment your beneficiaries will receive if you die while the policy is in force. It offers the most coverage for the lowest initial premium and is a solution for people with temporary needs or a limited budget. At a higher cost, a return of premium product will allow for your premiums to be returned if the premium period is outlived. When either policy term is done, it s done. However, many term policies can be renewed if you want to continue to pay your premiums--but those premiums will likely increase substantially. Some policies can be converted to permanent plans, or you can apply for a new term policy. Whole Life: Your premium will be eactly the same for the rest of your life and you ll know that when you die your death benefit and the rate of return on your policy s cash value are guaranteed. There is no risk of it losing value, but there s also no chance of it becoming more valuable. Some policies pay dividends that can increase the value of the policy. Universal Life: This is the fle-pay plan of life insurance. It allows you to vary the amount of your premiums while still guaranteeing a minimum death benefit as long as you meet the overall premium payment requirements. Indeed Universal Life: Allows the owner to allocate cash value amounts to either a fied account or an equity inde account, such as the S&P 500 or the Nasdaq 100. Indeed UL policies are more volatile than fied ULs, but less risky than variable universal life policies because no money is actually invested in equity positions. Legal & General America life insurance products are underwritten and issued by Banner Life Insurance Company, Urbana, MD and William Penn Life Insurance Company of New York, New York, NY. Banner products are distributed in 49 states and in DC. William Penn does business eclusively in New York; Banner does not solicit business in NY. Insurance policies contain eclusions, limitations, reductions of benefits and terms for keeping them in force. A licensed financial professional can provide costs and complete details. This piece has been designed to provide general information in regard to the subject matter covered. It should be used with the understanding that we are not rendering legal, accounting or ta advice. Such services should be provided by the client s own advisors. Accordingly, any information in this document cannot be used by any tapayer for purposes of avoiding penalties under the Internal Revenue Code. Securities and Insurance Products: Not Insured by FDIC or any federal government agency. May lose value. Not a deposit of or guaranteed by any bank or bank affiliate. LAA EVERY DAY MATTERS. BANNER. WILLIAM PENN.