Protection Products

Business Continuation: Who are the players and what do they want?


Protection

While sole-owned businesses continue to dominate, multi-owner businesses continue to increase by record numbers year after year. Business continuation is a vital part of any business succession plan, but with multiple owners and estates involved, it can be disastrous without proper planning. The surviving owners and the heirs of a deceased business owner have wants and needs that can be fulfilled by a well written business continuation plan.

When a business owner dies, the surviving owner(s) may want total control of the business without interference from the deceased owner’s heirs. They may want a prompt transfer of the deceased owner’s interest at a fair price. They may also want the loyalty and support of employees, customers and creditors during and after the transition in ownership.

The heirs may want ongoing financial security after the loss of the deceased owner’s salary and benefits. They may want a prompt settlement of the deceased owner’s estate, including proper tax-valuation of the business interest, if it is to be sold. They may also want retention of the business by family members or a prompt sale of the interest at an attractive price.

Without a written buy-sell agreement that spells out in detail what will happen when an owner dies, UNWANTED consequences may result. These include conflicts – and possibly litigation – between the deceased owner’s heirs and the surviving owners, delays in the transition to successor ownership and delays in settling the deceased owner’s estate. In addition, there could be potential loss of customers, employees, and creditor confidence that can damage the business and force liquidation.

Your clients could avoid these consequences and find many other advantages in creating a formal buy-sell agreement. This could be the first step in assuring an orderly and successful transition in business ownership following an owner’s death. It could assure a fair price for the business interest and terms of sale that are reasonable to all parties. It could help set a value for the business interest for estate tax purposes to help avoid estate settlement delays and IRS challenges. It could also create confidence in the ongoing vitality of the business in the eyes of customers, employees and creditors. 

The Bottom Line: Creating a written buy-sell agreement can fulfill the wants and needs of surviving business owners and the heirs of the deceased business owner. 

 

Advanced Markets Business Succession Continuation

Simplified Disability Insurance: Underwriting Made Easy


Protection

What’s keeping you from offering your clients disability income insurance? I know a majority of advisors will say it’s the exhaustive/dreaded/lengthy financial and medical underwriting process. If you’ve ever had a policy take more than two months in underwriting, I can see why you’d think twice. 

But it doesn’t always have to be so hard! Many advisors don’t realize that most disability carriers offer “simplified” underwriting guidelines, so your client may not require any medical or financial underwriting. 

Believe it or not, with simplified underwriting you can get away from those pesky paramed exams, fluid requirements and tax documents. In most cases, all you need is a short application and a telephone interview. The simplified process can significantly reduce the underwriting timeframe – some carriers can have a decision as soon as two days after the telephone interview.

This process does NOT sacrifice any of the riders/features of a fully underwritten policy, and the policy is still individually owned and portable. The benefits at claim time are still tax free when premiums are paid with after-tax dollars.

If your client is under age 50 and looking for a benefit amount of less than $6,000 a month, simplified underwriting options may be available. 

Put in Practice: Make your life easier by offering your clients simplified disability underwriting options! Talk with the Ash Brokerage DI team today!

 

Protect Your Clients from College Debt


Protection

If your clients’ children are looking at student loans, your clients should be looking life insurance.

Right now, deadlines are approaching for the Federal Application for Student Aid, and students may be looking at options to pay for college. While grants and scholarships are available, the ever-rising costs of tuition will likely force students to fund their education with loans as well. 

According to an article from the Wall Street Journal, 70 percent of the class of 2014 graduated with an average debt of $33,000 from federal, state and private loans. The longer they go to school, the longer it will take to pay it all back. According to an article from the Huffington Post, individuals with an associate's degree on average take 18.3 years to pay off their debt, compared with 19.7 years for those with a bachelor's degree and 23 years for those with a graduate degree.

Most parents of college-age kids are heading towards their retirement years and have financial obligations of their own. Before your clients cosign a student loan for their children, here are some questions to ask them: 

  • If you cosign a loan, did you know you are still responsible for your child’s debt if they are no long living?
  • How would you repay the debt?
  • Would you have to prolong your retirement or withdraw funds from your retirement account?
  • Did you know you could use life insurance to plan for this risk? 

Put it in Practice: It costs as little as $13 a month for $100,000 of coverage on an 18-year-old male for a 20-year term.* That coverage can not only secure your client’s financial future, but it can also protect their child’s future spouse and children. Ask if they can give up three cups of coffee a month for peace of mind. 

*Premium rates vary by a number of factors, including carrier, product client health and age, and a number of other factors. 

 

student loans college debt

Stop Trying to Sell – Start Asking Questions


Protection

In the last few years, I’ve been told over and over again how hard it is to sell long-term care Insurance. When I ask why, the “reasons” (or excuses) start flying in ...

  • It’s too expensive
  • Carriers are getting out of the business
  • There are no lifetime benefits
  • Rates could go up
  • My clients won’t need it

When I sit back and think, it seems like we are spending more time pushing products and less time helping clients put together plans to protect their families IF they need care. That’s right, I said IF. None of us thinks we’ll really ever need it, but then again, this isn’t about us. Long-term care planning is about our families. They will have to deal with the consequences of our actions – or inactions – not us. We will still get care.

But let’s get back to the excuses. I think we could get past all of this if we just stop trying to sell insurance. Think about the ways you present other solutions. 

When it comes to life insurance, we start by asking questions about the client’s family and goals, right? Why not just go in there with a $1 million life insurance quote? Or how about retirement planning … Do you just throw a prospectus on the table and say, “Buy this”? Probably not. 

So, why do we resort to these things when it comes to long-term care insurance? Are we just selling insurance … or do we want to give clients a plan to protect their family? 

Before you jump into your next sales pitch, back up and start with a few questions:   

  • Have any of your family members or loved ones needed some sort of care?
  • Would you agree that the longer you live, the greater the likelihood your health may become compromised and you might need care?
  • IF something was to happen and you needed care, how would you pay for it?

Let’s face it: Most clients don’t think that they will ever need care. I know I don’t. But, it isn’t about me – it’s about my family. If, and I emphasize IF, I were to need care, that last thing I want is for my wife or kids to suffer because I was selfish.  

Put It In Practice: If you want to make your life easier, and maybe help protect your clients and their families, STOP trying to sell them long-term care insurance and START asking them about their plan IF something were to happen. If you don’t want to go down that road, call us! We’ll be more than happy to be part of your team and have the conversation for you.

 

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long term care care planning

Split Dollar: Dead or Alive?


Protection

I can’t believe that 2004 was already a decade ago – things have changed since then! George W. was re-elected for his second term as president of the United States, a massive tsunami hit the Pacific Rim area, and Facebook was in its infancy and only available to college students.

Mixed up in all that was the start of the 2003 IRS rulings on the tax changes made to split-dollar plans – how that was lost in the mix, we’ll never know. Specifically, let’s talk about the changes to “collateral assignment” arrangements.

The IRS changed the favorable tax treatment of the premiums that were paid by the employer on behalf of the employee. These payments became considered loans, and the employee has to pay a “sufficient” interest rate as determined under the regulations, instead of the “interest free” loans that were allowed prior. If the loan doesn’t meet the adequate rate of interest, then regulations have a complex system of deemed interest flowing to the employee as income and then back to the employer as interest.*

Most companies and executives thought this was the end of the split-dollar train, but as Lee Corso would say, “Not so fast, my friend!” If set up properly, split-dollar plans still have a wide array of viability to attract and retain key employees and executives in the business marketplace. 

Split-dollar life insurance is widely used in gift and estate planning and can be an important part of the compensation package for key employees. Your clients don't have to cover all their employees – the coverage, amount and terms of the split-dollar arrangement are generally not subject to the nondiscrimination rules of the Employee Retirement Income Security Act (ERISA). Split-dollar plans can be used to:

  • Attract, motivate and retain employees 
  • Provide employees with low-cost life insurance  
  • Fund severance benefits 
  • Fund stock purchase agreements 
  • Fund nonqualified deferred compensation plans 

Put it in Practice: Don’t be afraid of something that happened more than a decade ago. With interest rates at near all-time lows, collateral assignment split-dollar arrangements might be a key to your clients’ recruitment, retention and success for the foreseeable future. Contact the Ash Brokerage Advanced Markets team to get started. 

 

*The Sarbanes-Oxley Act made it illegal for a company that is publicly traded to loan funds to an officer or director, and certain other key employees.  

 

Split-Dollar Life Insurance Advanced Markets