Page 1

May 2014

True Health is Wealth page 4

Would you like to Double, Triple or possibly Quadruple Your Business... For Free? page 4

How to Speak to Your Avatar Clients at a Dinner Party... in Your Mind page 5

How To Develop a S.M.A.R.T. Plan™ page 8

Everything You Thought You Knew About TIME Is Wrong Introducing page 9

A CPA’s PERSPECTIVE ON THE S.M.A.R.T. Plan™ page 12

ISAAC WRIGHT Success=Relationships, Not Customers page 2

More Inside:

• HEALTHY LIVING • Sudoku • The Funnies GO TO =>AUMMastery.com

1


SUCCESS=RELATIONSHIPS, Not Customers MAY SPOTLIGHT: Isaac Wright knows how to build a proactive service model how to service clients and their families. Isaac Wright knows how to build a proactive service model - how to service clients and their families. Mr. Wright uses the AUM Mastery process, which allows you to be able to develop a situation to have a credible conversation with a family. Any person who advises clients in financial matters can talk about stocks, mutual funds, insurance and other financial devices. But, can they talk to their clients about the client’s father who just passed away? That is the question Mr. Wright struggled with after the passing of his own father. In today’s world anybody can jump on the Internet and find answers to anything. If a person wants to know what stock is hot or which insurance product is the best for them to purchase they Google it. Of course dealing with any financial matter needs expertise. The competitive advantage of FAs is that they are human and have the ability to connect on an emotional level. The question is, does the FA allow their clients and prospects to see and feel what the relationship means to them? Mr. Wright and his team were putting together a couple of client appreciation functions in 2013 to let them know just how much they are appreciated for trusting them with their very personal financial matters. The question was brought up, “Have we ever really asked each of our most important clients what would they find enjoyable in terms of a client appreciation event?” So, they sent out 200 surveys. And the response from the survey was un-

2

precedented! Of 200 hundred surveys they sent out they received more than 100 back – a response rate of 50%! The most popular response his clients wanted more of were dinner and wine social events (a more relaxed setting). Once more, the clients were really impressed Isaac and his team took time and listened to them. People just want to be heard - and to actually hear them and how you heard them – is very powerful. With AUM Mastery, advisors are able to have specific conversations about how money would react to certain scenarios, like the inflation or if gas goes over $5/ gallon, with a visual report that allows their clients to see what may happen to their money in the future under a given circumstance. It opens up a whole new level of conversation. And mutual understanding. The AUM Mastery process teaches advisors how to slow down and really bond with a potential or existing clients on a continuous basis. Not only does the AUM Mastery process help retain clients, it brings them in from advisors who are only speaking with clients once a year and maybe sending a birthday card. As all advisors know, it is tough to attract clients today, especially after the Financial Crisis of 2008. People are still weary of the market and what could happen to their money – again. The last thing an advisor wants to have happen is to have a client walk away from them because they’re not communicating and emotionally bonding with them. The AUM Mastery process changes the perspective of the client by turning the first “sales” meeting into a discovery meeting. Before the client even comes in have a conversation with them about the expec(Continued on Page 3)


(Continued From Page 2)

tations of how the first meeting is going to go. In that conversation the client gets the chance to share what is important to them and gives the advisor a chance to see what kinds of questions the client will have. When the first meeting arrives, the client is told that at the end of the meeting, if there is any value for the client, they will be shown what improvement looks like and if they are in a position where everything is structured and set up properly. By giving the client a chance to talk and voice their concerns upfront, two things happen: One, the client gets to hear themselves voice their concerns to the advisor; and, two, the advisor gets to know what the client’s top concerns are based on what is going on in the world today. Everybody is on the same page; everybody is prepared and expecting the same result. In short, the AUM Mastery process is about elevating relationships. It’s about the bond that advisors build and the trust that is taking place. And, the process backs up that trust with something that is concrete – an analysis that the client can see and understand. By using the AUM Mastery Process and focusing on relationships, Mr. Wright earns the right to manage between 10 to 20 million dollars of new assets under management each year.

ABOUT ISAAC WRIGHT

Isaac Wright is a comprehensive financial planner with a focus on retirement planning and asset preservation for families and retirees. He is well recognized in the community and has been assisting families and retirees reach their financial, retirement, and estate planning goals for over 14 years. He has built a reputation with his colleagues and clients as a problem solver while providing exceptional customer service. Using an education based approach to planning, Isaac is a frequent, sought after public speaker and has been invited to be the keynote speaker with many groups focused on retirement, estate, and long term care concerns facing families and retirees today. Isaac is the author of “Navigate Your Way To A Secure Retirement”. He also has appeared on television and other media outlets including CBS, WRVA, The Richmond Times Dispatch and other publications discussing the importance of planning for a successful retirement. Isaac has been awarded numerous industry accomplishments and among his peers, he has been a member and contributor to several mentoring and private coaching groups including Ed Slott’s Elite IRA group. Isaac is a graduate of Virginia Commonwealth University and is a lifelong resident of the Richmond area. He enjoys spending time with his family, playing golf, and exercising at the gym.

GO TO =>AUMMastery.com 3


WOULD YOU LIKE TO DOUBLE, TRIPLE OR POSSIBLY QUADRUPLE YOUR BUSINESS...FOR FREE? Dear Friend & Fellow Advisor: I’ve set aside some time to speak with you, personally. During that time, I’ll evaluate your business and work with you collaboratively to create an immediate action plan to increase your sales and profits. There is no charge for this and there’s no catch. If you enjoy this conversation and get value from it, we can discuss working together long term. And if you feel I’ve wasted your time in our conversation, I’ll send you a check for $1,000 as compensation. Either way, you’ll come out ahead. Email me at Centurion@aummastery.com and make sure you leave your first name, last name and a telephone number so my assistant Aaron can reach out and coordinate our call. la

~Matt Zagu

TRUE HEALTH IS WEALTH by Dr. Stacey Bell

IT’S TIME TO PUT YOUR MONEY WHERE YOU MOUTH IS I bet that you spend a lot of time managing your finances. What is it? Two hours a week? Two hours a day? And, why do you do this? It is likely because you want to get a good return on your hard-earned investments. Presumably, you want to enjoy the money you accumulate and use it for fun things like travel, dining, a new car, and the like. This is a reasonable scenario. But how much time do you spend managing your health? I bet nowhere near what you spend on your finances. It seems to me that wealth and health go together. What’s the point of making money and not being able to spend it due to illness, or worse, death? If you make a bad investment deal, you lose your money, and that’s it. Your body is more forgiving. If you haven’t taken care of yourself before, you can start now. Yes, I mean today – this minute. Here are a few tips on how to live longer, reduce your likelihood of developing diseases, and feel more energetic. From my experience of counseling more than 10,000 patients, I know

4

that trying to tackle all of these at once will be impossible. Just incorporate one or two at a time. Then, you’ll be on the road to better health and enjoy your financial gains.

HEALTH AND NUTRITION TIPS

Regular medical check-ups. Most diseases are best treated when they are caught early. For people over 40 years of age, a yearly physical is a must. It is likely that nothing will be found in the 40s and 50s, but at least your doctor can get a handle on how healthy your heart is. This is the number one cause of death for men and women. Achieve a good body weight. Two-thirds of Americans do not have a good body weight. If you are one of them, the goal is to lose only 5% to 10% over the course of a year. And, it is best to lose one to two pounds a week. This modest weight loss rate and amount leads to the greatest health benefits (e.g., lowering of blood pressure, blood sugar, and cholesterol). Your body will thank you, and if you succeed, you can lose another 5% to 10% the following year, if need be. (Continued on Page 7)


How to speak to your avatar clients at a dinner party ...in your mind Imagine if you had a calendar full of clients who were ready to do business with you, on your terms, and were ready to invest all their money with you. Plus, they were delightful people to work with and they loved you and your stuff. That would certainly be ideal, wouldn’t it? The question is this: Is that possible, or is this merely an exercise in fantasy? I believe that over the next 700 words or so of this article, I will convince you that it is in fact possible. First, here’s the background. In a special consultation offer that I call $50k Guaranteed Growth Plan, I help producers figure out who their avatar client is, how to attract more avatars and ultimately eliminate working with uncooperative and difficult clients. As a reader of Advisor Spotlight, you are going to learn exactly how I helped these top producers gain intense focus on the “right” kind of client. Here are the steps: Step 1: Gain crystal-clear insight into how much money you want to make. If you immediately thought, “As much as possible, stupid,” then you are in trouble.’ Success isn’t created by desire, it’s created by action—more specifically, intelligent action. Here is how we identify how much we truly want. Think about these: You open your eyes in the morning—is this the right bedroom for you? When you go to the kitchen, is it what you really want? Your house—is this your dream home? Is it the best home for you, your spouse and your kids? You’re driving to work—- are you in the car you want to drive? Your office—is it in the right part of town? Is there a better building with more prestige. a building that would be more comfortable for

your clients? Your staff—are they superstars or are you tolerating their professional inadequacies? How much do you earn? Is there an amount that you always identified as representative of true success—maybe a million dollars a year net? Maybe more? In order to hit your target, you must know where you really want to go. Anything with less clarity is like getting on a plane and hearing the pilot say, “OK, we are taking off for Cleveland,” when you want to go to Orlando— you have to know where you want to land. Step 2: Determine who are the best clients you have or have ever had. Make note of their name, age, where they retired from. what organizations they belong to, their religion, charities, etc. Step 3: Consider your four or five bestever clients and put them at a dinner party together, in your mind... What would they talk about? What books do you think they are reading? What TV shows do they watch? What do Lhey have in common? Religion? Politics? What would they all agree on? What would offend them all? Analyze your data and then formulate Your Maximum Impact Book Title. For me, this flushed out as “The Invasion of the Money Snatchers.” As you can see, it visually speaks to conservative seniors who aren’t thrilled with the current administration. Why did I choose this theme? Because this is the kind of book I saw my avatar clients reading when I did this practice-building exercise. How would my avatar clients find this book? I imagined that my avatar clients (Continued on Page 6)

GO TO =>AUMMastery.com 5


(Continued From Page 5)

watch the Fox News Network. So, I created a two—minute, infomercial—style TV ad pitching my book and airing exclusively on the Fox News Network. Conceptually, more avatars will come and “raise their hand,” asking for a copy of my book. The book I send to ad responders will include a 17-page report on “How to Find and Retain the Best Advice Givers.” That white paper will be about why my firm is their best choice. The report is actually six separate reports that all come to the same conclusion—hire me. How would my avatar clients want me to show up? In a world of 3,000 marketing messages a day, I’d imagine my avatar clients would want me to get to them quickly. So, my report, book and cover letter are all FedEx’d the day they request the information. Literally, my avatar clients will get their information the day after they request it. My avatar clients do NOT want to be sold...or least they believe that! The last thing I want my avatar to think is that I am just some phishy salesman type. I show up, via FedEx, as the author, the authority and the leading expert. I explain in detail that I absolutely will NOT call them; ultimately, it is their responsibility to act on this new information. I don’t solicit—hungry— wolf financial salespenpie do that. I’m an expert, not a salesman. I imagine most avatar clients would have desires that are similar to those above. There is no better use of your time On a quiet evening than to consider the three steps above and host that dinner party in your mind. This powerful exercise affords me great peace of mind because, while most financial advisors are “battening down the hatches” to weather a future financial turbulence by cutting their marketing budget, I’ll continue marketing to my avatar clients harder and more than I ever have before—ensuring that 2014 will be my best year ever.

ABOUT MATT ZAGULA

Matt Zagula is known as the most sought after advisor- client conversion expert and unique business process builder in the financial advisor community. He is famous for creating the ACE Advisor Process that increases an advisor’s sales while skyrocketing their client loyalty without drying up their monetary cost or resorting to stale and cheesy industry sales techniques. Matt stands up against the destructive marketing organization mentality that ‘increased spending on marketing alone to increase production’ is the answer. It’s Not! Their success is based on your gross but your success is about your net + your time!

6

Advisor Spotlight® Vol. 1 Issue I Matt Zagula, Editor-in-Chief Sissel Heide, Design Jerry A. Jones, Assistant Editor Advisor Spotlight® is published monthly by Novus Venalicium, Inc. 4742 Liberty Rd S #262 Salem, OR 97302

IMAGE

Comments? Fax to: (503) 218-0557 or, email: Centurion@aummastery.com Advisor Spotlight® is meant for entertainment purposes only. The stories contained within reflect the individual views of the authors and do not represent the opinion of the publisher, or its affiliates. © 2014, Novus Venalicium, Inc. ALL RIGHTS RESERVED. MAY NOT BE DUPLICATED IN ANY FASHION FOR ANY PURPOSE, WITHOUT EXPRESS WRITTEN CONSENT. Cover Photo Credits ©matusciac/Dollar Photo Club

LOVE this magazine? Be sure to let the sender know! Or, send an email to centurion@aummastery.com, and we’ll pass it along!

FILL


(Continued from Page 4)

Don’t get fooled by what you see on “The Biggest Loser” or in ads for quick weight loss. People who lose too much weight too fast have almost 100% chance of regain. Slow and modest weight loss results in permanent benefits. Eat a healthy diet. This is harder than you think. It seems to me that no one knows how to do this, including me (I have a doctorate in nutrition). What I have learned from reading thousands of articles on nutrition and health is that it is best to focus on what foods to add, rather than which ones to subtract. Sure, everyone knows that they shouldn’t eat potato chips, drink sugary carbonated beverages, or indulge in rich desserts. But, a smarter approach is to add one healthy food each day to your diet. And, if you are really gunho, you can add a couple. I would suggest adding: one piece of fruit, one serving of vegetables, a dairy product like milk or yogurt, and some whole-grain foods like bread or pasta. Don’t get hung up on “super foods.” They don’t exist. Just add a variety of foods from each category. Sleep. Enough said. You are not super-human. The optimal length of time for all Homo sapiens (that is you) is 7-9 hours. Weight gain occurs more easily in sleep-deprived individuals. Don’t do this to yourself. Exercise. This is not a four-letter-word by any

means. If you think you need to join a gym, perspire, or engage in an activity for a couple of hours to count as exercise, you are just dead wrong. Exercise means getting off your backside, not eating, and moving. Walking has been shown in numerous clinical studies to be the best exercise because it does not harm your joints, improves your mental capacity, and gives your heart the faster pace that it needs. They key to exercise is that you assign X minutes a day to do it. Start off with 5 minutes. Then go to 10 minutes a day. Gradually build up to about 30 minutes a day. If you can’t find this small amount of time for a walk, then you may want to re-evaluate your priorities. Now it is time to really put your money where you mouth is and take some action on your health.

ABOUT DR. STACEY BELL

Dr. Stacey Bell is a partnership participant within the AUM Mastery sponsors your radio show program for financial advisors. This program allows an advisor to gain the added credibility of a national expert on their show and receive affiliate compensation when properly designed and disclosed. Currently this program is sold out but call us today at 1-888-755-5171 to get on the priority list when openings become available.

GO TO =>AUMMastery.com 7


h o w s . m .

t o d e v e l o p a a . r . t . P l a n ™

What’s a S.M.A.R.T. Plan™? S.M.A.R.T stands for the Strategic Movement Around Retirement Taxation! Sounds good already doesn’t it ☺ Before I explain what a S.M.A.R.T Plan™ is let me explain who it can work for first, so you can determine if reading this chapter is going to provide great value for you. If you fit this scenario profile I can assure you this chapter is filled with fantastic tax free opportunity for you and your family and learning about the S.M.A.R.T. Plan™ is a fantastic use of your time. This plan has the following situational requirements to be properly implemented for your benefit – here’s they are: 1.) No need for income from your IRA beyond your Required Minimum Distribution. 2.) No future income loss (of significance) to your spouse if you predecease her – many of our clients have pensions that cover not only the working spouse but 100% is paid to the surviving spouse as well. So income loss, post death is not an income planning consideration. 3.) You have a desire to transfer wealth to your children and your grandchildren in a tax preferential manner. 4.) You already are earning an income level that maxes out your percentage of social security that is taxable. 5.) You and your spouse (if you are married) are healthy and between the ages of 60 and 78 years old. If this sounds like you then our S.M.A.R.T. Plan™ very likely will be a very smart plan for you. Let’s look at a case study where the names have been changed but the case facts are accurate and may resemble your own situation. Chris and Shirley are very healthy and active retirees. Chris is 75 but very fit. Shir-

ley is 73 years of age but looks at least 25 years younger and is very healthy. They have two adult children both married, successful and in their forties. They have 4 grandchildren all of whom are healthy and in school. Chris & Shirley have after tax assets in savings bonds, money markets and a few short term bank CDs totaling $400,000. This gives them the flexibility they want if they choose to access their funds for home improvements, buying a new car and the occasional spontaneous vacation for a good golf weekend out of town. In addition, Chris has two IRA accounts totaling $600,000. At 75, the income he takes is based on his RMD; his required minimum distribution only. The reason he takes the least amount required by law is because between his pension (which is payable to his wife Shirley in the event he predeceases her at 100% of his current pension amount), his Social Security and Shirley’s Social Security they have household income of $6,100 per month. So for Chris his IRA RMD is money that is distributed, taxes are paid and then used to buy more bonds or CDs. When one of them dies, the other has the exact same income post their spouses death of $5,000 per month. The reason is the income loss either way will be Shirley’s $1,100 per month social security. If Chris dies then Shirley will inherit his social security. If Shirley dies Chris retains his higher social security payout. Both keep the full pension income. The diagram (see page 10) shows the current holdings in Chris’s IRA: Chris owns a variable annuity with $320,000 of his IRA that provides a lifetime income guarantee of $1,606.49 per (Continued on Page 10)

8


E v e r y t h i n g Y o u T h o u g h t Y o u K n e w A b o u t T I M E I s W r o n g Procrastination is OK as long as you “get it done.” Waiting for others (or others waiting on you) is OK. Showing up on time or slightly late is OK. These are three of the big problems I have with about 60% of the people I deal with that don’t know me, my habits or my personal demands on my time and that of other people’s time. I detest procrastination. Sometimes, it gets the best of me. But, something you might think of: It you’re procrastinating, maybe you shouldn’t be doing whatever it is you’ve planned anyway? Maybe it’s a “waste” of time to even consider it? Otherwise, if it was really important, wouldn’t you work to avoid putting it off? Anytime I have to wait for someone that has made an appointment for me, I lose interest, very quickly, in what it is they may have to offer or what they may want from me. Yes, even lunch “dates,” even family. I recently had a couple invite me to coffee here in Salem. They “heard” I was a real estate trainer (reformed and far smarter now you might say!). They had read about some of my progress in an industry trade newsletter and wanted to know if I would be able to offer them some pointers. So, I called them back after a few days and confirmed a time. I was five minutes early on our appointment date. They never showed. Of course, they had an excuse. I never got to hear it because I decided I would never give them an opportunity. I couldn’t care less. Add salt to my wounds,

they never even called to let me know they wouldn’t make it. Screw ‘em. Next! When I was a kid, I asked my dad, “How come we are always early wherever we go?” He told me, and I’ll never forget it, “If you’re not early, you’re not on time, and if you’re not on time, you’re late and if you’re late, just don’t bother. It’s disrespectful. And, it shows you really don’t value anyone else’s time, including your own.” I’ve never forgotten that. He’s right. Time is precious and the only thing we have a finite amount of is time. Not even MONEY is as impor- tant as time. Why let people steal if from you? “Time is money.” - Ben Franklin Anthony Robbins said, “One reason so few of us achieve what we truly want is that we never direct our focus; we never concentrate our power. Most people dabble their way through life, never deciding to mas- ter anything in particular. In fact, I believe most people fail in life simply because they major in minor things.”

ABOUT JERRY JONES

As the nation’s top expert on professional practice marketing with 20+ years experience, Jerry spends most of his time working with clients to create, write, design, and track results for various client attraction and retention marketing campaigns. Jerry has started, grown or sold over 13 different businesses in a variety of industries. He enjoys fishing in Alaska (or anywhere there’s fish) with his family and vacationing in Mexico and other warm areas. You can get his latest book, The Business Anarchist’s Guide to Peak Productivity & Time Management, at www.jerryjonesdirect.com.

GO TO =>AUMMastery.com 9


(Continued From Page 8)

month for himself and Shirley based on the claims paying ability of the insurance company. Annually, he takes the remainder of his RMD from a fixed IRA annuity that holds the remainder of his IRA balance. On average, at his age Chris would take a single lump sum from the 2nd IRA annuity with a balance of $280,213 of roughly $4,800 to $5,000 per year. This distribution has always been a nuisance because the aggregation method for RMD was calculated off of his 12/31 prior year balance then deducting the distribution from his variable annuity. This annual “ritual” is filled with potential financial hazards and could create a 50% tax penalty for any miscalculation errors. The S.M.A.R.T Plan™ considers the hierarchy of smart tax planning first. Since Chris and Shirley are solid on their foundational

10

income with $6,100 of monthly income, their goal is primarily geared towards family wealth creation. With that goal defined tax deferral makes little sense. Consider this: $600,000 grows to $1,000,000 tax deferred and the tax rate at your death is 38% when your heirs start distribution – what’s the true value of your IRA? VS. $600,000 grows to $800,000 tax deferred and the tax rate at your death is 22.5% when your heirs start distribution – what’s the true value of your IRA? Well, it’s the same! If you consider the tax rate as the percentage the government “owns” of your pre-tax money then the math is: 38% of $1,000,000 = $380,000 deduct from $1,000,000 = $620,000 net value to family. (Continued on Page 11)


(Continued from Page 10)

Whereas, at a 22.5% tax rate on $800,000 = $180,000 deducted from $800,000 = $620,000 net value to your family. So, step 1 is being tax SMART! By using another fixed annuity with a lifetime payout guarantee for both Chris and Shirley, their income is increased dramatically by $1,462 per month ($17,544 per year). Based on their prior year’s tax return and them allowing our firm to use up their prior years “refunded” tax liability, we needed an additional withholding of $2,544 which was withheld directly from the annuity contract. The net distribution after withholding is $15,000 and is available to purchase a 2nd to die life insurance policy insuring both Chris and Shirley. 2nd to die life insurance is a life insurance policy that pays out on the 2nd death. So, if Chris dies there would be no death benefit paid until Shirley dies (and vice versa). The policy should be held in trust so that it is protected from creditors and their long term care risk. Speaking of long term care risk, the new annuity that replaced the old fixed contract offers not only a guarantee of income, but also an enhanced payout after 2 years of ownership of double the income guarantee for up to 5 years (total). If either Chris or Shirley fail 2 of the 6 activities of daily living (dressing/bathing, eating, ambulating (walking), toileting, hygiene) their monthly income goes from $1,462 per month to $2,924 per month. This way, there is substantially more income to help support them in their time of health care need, plus original income amount to continue to fund their tax free family trust. Now … That is SMART! So, let’s review the S.M.A.R.T. Plan™ above: 1.) We have a successful couple who are well covered for their foundational income needs.

2.) They want to develop a plan that is tax smart and beneficial for their children and their grandchildren. 3.) They want a plan that can handle the added financial burden of future healthcare help for themselves, if needed. For Chris and Shirley the Strategic Movement Around Retirement Taxation made sense. Now, a $600,000 IRA is providing them with $1,606.49 of monthly income AND building an asset for their family of $659,915 tax free using a portion the additional $1462 per month of income. When you consider the internal rates of return (IRR) and the normal life expectancy of a very healthy 75 year old male and a 73 year old female, the tax free rate of return is REALLY SMART – here they are: IRR at various ages: Age 90 Chris / 88 Shirley: 12.58% tax free (17.97% taxable equivalent at 30% tax rate) Age 95 Chris / 93 Shirley: 7.02% tax free (10.03% taxable equivalent at 30% tax rate) Age 100 Chris / 98 Shirley: 4.11% tax free (5.87% taxable equivalent at 30% tax rate) IMPORTANT NOTICE ABOUT 2ND To DIE LIFE INSURANCE: These rates of return are based on preferred health insurance ratings. Your individual health will ultimately determine the internal rates of return. Often, underwriting offers are affected by the underwriting guidelines of the various insurance carriers. Seeking expert guidance from an advisor who is qualified and knowledgeable about the differences between insurance company underwriting guidelines can dramatically change the offer you receive. Once you make a formal application to an insurer and receive a sub-standard rated offer, gaining an underwriting advantage through knowledge of the carrier’s underwriting policies is eliminated. It is critical, when the stakes are this high to only work through a seasoned professional as the offers can vary by hundreds of thousands of dollars and applying through your P&C agent or less knowledgeable advisor where you’ve signed a formal application can result in irreparable harm to your ability to get the best possible rating and the best plan for your family.

This content and Advanced Advisor Tools are posted at:

AUMmastery.com

Membership is free for recipients of The Advisor Spotlight Magazine

GO TO =>AUMMastery.com

11


A CPA's PERSPECTIVE ON THE s. m. a. r. t. Plan™ by Stephen M. Magnone, CPA

The S.M.A.R.T Plan™ makes a lot of sense because it is allowing the taxpayer to take excess cash that isn’t needed for daily expenses, but will ultimately be required to be distributed, and turning it into a tax free windfall for their heirs. As you might figure, funds that are required to be distributed, but not needed for daily living expenses are generally reinvested into CDs or other liquid investments each year that provide even more taxable income and, with that, an increased tax bill. If the funds are not reinvested, they are generally gifted in small amounts to family members that have a small impact on their lives. By using the S.M.A.R.T. Plan™, you can achieve a greater return on your money while providing meaningful and appreciated financial help to those you leave behind. Reinvested funds, in today’s market, might achieve a tax equivalent rate of return of approximately 1.6% up to 2% depending on the investment alternative . Even if the markets tick up over the next 15 years, the tax equivalent yield will most likely not exceed a safe money return of 6%, if you use that as a baseline. When funds are used to purchase a life policy such as the one described above, the internal rate of return such as the policy will generate a tax equivalent annual yield of approximately 13% if the policy is in force for 15 years and the youngest of the two individuals passes at 88 years of age. At 88, that person will have lived beyond the norm, so in my mind, 13% is a conservative baseline tax equivalent yield for the policy with little to no risk. It would be hard to find an alternative that would do that without taking considerable risk.

12

Another consideration is the taxability of IRAs to your estate and your beneficiaries. If you can balance out the rate the client is paying on the RMD at a fairly low rate today, if is a fairly safe bet it will be lower than the rates paid by individuals in the future. Therefore, if you pay on the policy discussed above for 15 years, you will have relieved your beneficiaries of paying tax on $225,000 that would be left in your IRA when you die, or approximately $56,000 in taxes (assume a 25% tax rate). In this scenario, they would be left with about $169,000 in inheritance ($225k-$56k). By using the S.M.A.R.T. Plan™, you would help your client turn a $169,000 inheritance into $660,000 or a windfall free of tax of $491,000. In conclusion, if you have clients in this situation the S.M.A.R.T. Plan™ appears to be an excellent investment that can help a client have a profound effect on the lives of their heirs without much pain on their part to make that possible. S.M.A.R.T. Plan™ is the trademark of Matt Zagula – the Strategic Movement Around Retirement Taxation – All rights reserved.

Advisors Spotlight  

Helping financial advisors increase their income.

Read more
Read more
Similar to
Popular now
Just for you