The Legacy Program
The Forever Financial Connection
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I
t was the summer of 1993. I had been in the life insurance profession for over six years at that point, and sure, I read all the manuals and listened to all the trainers, but in many ways, it just didn’t relate to “real” life. However, as I looked over a particular payout illustration again, I suddenly realized the value of life insurance. I got into the life insurance profession to enhance my position selling investments as a registered representative. I had already seen the market bust in 1988 after a soaring bull market, and I wondered what the next thirty years would look like and whether our “illustrated” rates would hold up. At thirty- six years old, the time had arrived for me to make decisions about my own retirement. The illustration that helped me realize the value of life insurance was one of a second-to-die plan, which is essentially a plan for a married couple or business partners who purchase life insurance together; there is no payout of the death benefit until both purchasing partners dies. For $531 a month, the second-to-die plan would payout $300,000 at the death of the second insured based on projections of a seventy-four-year-old male and a seventy-year-old female, which just so happened to be
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the age of my parents. My dad was in great shape, but mom had suffered through some heart problems in her sixties.
I connected the dots and thought, “What an incredibly easy way to use love for each other as a guarantee for fulfilling a family legacy!”
According to life expectancy tables, a seventy-year-old female, on the average, should live for another 16.57 years—although because of my mom’s health problems, her life expectancy level dropped to under eleven years. For a seventy-four-year-old male, the projected life expectancy was eleven and one-half.
I figured it this way: If I were to start one of these plans, five hundred dollars would be the monthly amount that I could commit to. Remember, back in 1993, $300,000 was a big figure for someone like me who had only just begun to think about retirement. So, I took my parents to lunch and pitched my idea
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“I’ve finally taken my retirement plan seriously,” I started. “You know I got into this business to learn more about investments and to help others, and what I’ve realized is just how much a rollercoaster ride investments can be. I still believe in them, but when I consider an IRA, I can only put in $2,000 a year (1993 figures). I’ve decided to invest $500 a month. Although I can put $2,000 into an IRA on a before-tax basis, I will have to pay tax on every single penny I take out when I reach retirement.” I explained how I wanted to purchase a $300,000 secondto-die life insurance policy on them, and that my $500 a month investment would be that premium—they wouldn’t have to worry about paying it. “I’ve been in the life insurance business for six years now and I finally realized what a pure asset life insurance can be. In my mind, it’s a must.” I explained to them their life expectancy. “My hope is that both of you will live long, healthy lives, and I’ll win just having you in my life as longer as possible. But if your life falls somewhere near that number of life expectancy years, purchasing life insurance is one of the smartest moves we could make for our family legacy.” “I think it’s a great idea as a common-sense decision,”
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my dad said, once everything had been laid out. “And I’ll even pay the first year’s premium. Go ask your brother if he wants to do the same thing.” Mom agreed. “I think it’s wonderful.” When I presented the idea to my brother, he wanted to do it as well. The legacy gift was fulfilled last May when mom passed away at the age of 97. Dad only lived for a little over seven years, as in 2000 he developed aches in his muscles and a few months later he succumbed to ALS. Throughout the years, mom would ask, “Is your policy up to date? Do you need help keeping it current?” I would smile and thank her. “Mom, it’s current. You’ve helped me enough. Thank you for being willing to allow me to insure you back then. It made such a difference in my retirement planning.” I know she felt proud to know she was helping her sons achieve their financial goals by allowing us to insure her life. That’s the value of life insurance.
See, life insurance proceeds are tax
free.
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Let me tell you about a conversation that I had with one of my clients a few months ago. Julie was thirty-five years old. Like me, she was at the age where serious retirement planning was on her mind. We talked about the markets and other aspects of building assets, and then I asked her the age of her parents. She told me that her mom was sixty and her dad was almost seventy-three. I asked about the health of her mom. She said, “Perfect health!” I told her how incredible that was. I also shared with her
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this same investment idea I had used with my parents. “Let’s see if your mom would be open to helping fulfill your retirement legacy,” I said. “How much are you willing to put toward your retirement?” “I make $60,000 a year and I only have a few bills. Maybe 10%,” she said. “That’s a great number,” I replied. What happened next made her mind spin. I showed her an illustration from a top-rated carrier. For $507, she could purchase a $500,000 life insurance policy on her mom, whose life expectancy was almost twenty-four years, which would put her at eighty-four years old. If she passed away at that age, Julie would have put in about $150,000, she would only be fifty-nine years old, and all proceeds would be tax free. However, if Julie’s mom had a much longer life, it would become an even more wonderful story. According to the illustration we were looking at, premiums would end when Julie’s mom turned ninety, which means the maximum amount that Julie would ever pay would be $182,776. But what if something happened to Julie’s mom like what happened to my dad? Even if her did not reach
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life expectancy, Julie would still receive the $500,000 tax free. Julie was silent. Finally, she said, “I can believe that’s even possible. I’ve been told and I’ve read that permanent life insurance was not a good value.” “Julie,” I said, “not only is it a good value, it’s a great value. Life insurance creates cash where there was none before. Where there was nothing more than a piece of paper and an agreement, there comes cash, not to mention at a time when you need it the most
“
The legacy that you create with your family becomes unmistakable. It’s a combination of love, emotion, and common sense.”
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Currently, we’re in one of the lowest tax rate environments in the history of our country. No one doubts that. We’re also in heavier debt than we’ve ever been—a fact no one will doubt either. The problem is that at this point it’s almost ensured that we’ll be taxed at much rates in the future. No one knows what and when that number will be, the it’s a sure thing nonetheless. Imagine putting away any amount of tax-deferred dollars today.
It’s pure speculation, but what if the $1,000,000 you invested only nets you $500,000?
Many of today’s life insurance policies come with accelerated benefits as well. This means that the insured is able to access part of the death benefits for critical, chronic, or even terminal illness. “Julie, we don’t know what the future holds. You never know, this benefit may be more important to you in providing long-term care needs to your mom. But know this: you’re the
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owner of the policy. It’s not part of your parents’ estate.”
thing back in 1993. Currently, each of you could give Julie up to $15,000 as a gift without causing her any tax penalties.”
Julie turned to me and asked, “How would I ever explain this to my parents?”
Thomas immediately responded, “Then, let’s double the coverage and we will each provide $6,000 so she can receive a $1,000,000 tax-free payout.”
I told her that that was my job as a life insurance professional who has been in the business for thirtyfour years. It would be difficult for her to understand each step of how to set the plan up, so I shared my idea. “Mention it to your parents and see if they are open to the idea of a conversation. Then, we could do a virtual meeting where you can introduce me. By doing it virtually, its free of any pressure and is more of a conversation. In most cases, I’ve found that parents are thrilled about the idea and are willing to help.” A couple of days later, Julie gave me a call and asked to set up a virtual meeting. In that meeting, we discussed how Julie’s mom would be the better person to insure owing to her younger age and lower cost of insurance. Both parents seemed more than willing to take a paramedical examination to provide the coverage for Julie. Julie’s dad asked, “Can we put money into this plan for her?” “Funny thing,” I replied, “my dad said exactly the same
DANNY RASBERRY Rasberry Producer Group
601-649-2822 danny@rasberrypg.com rasberrypg.com
“I couldn’t agree more,” I said. We filled out the application and Julie’s mom came back with the best rating possible: Premier. Julie’s parents gifted her a $1,000,000 life insurance policy—what a wonderful show of love! Although not everyone is blessed with parents who can actually gift the premium, the investment strategy remains something to seriously consider.
Will you?