With Estate Tax Change In Mind, Clarica Debuts `Short Term Survivor UL
When proposals to reduce or eliminate the estate tax started getting serious attention last year, veteran estate planner Joe Caramadre noticed a startling trend in client decision-making: Survivorship life prospects began putting their buy decisions on hold.
They didnt dislike the price, companies or policies, says the president of Estate Planning Resources in Providence, R.I.
But they were uncertain about the outcome of estate tax reform, so they wanted to wait and see what would happen, says Caramadre, who is not only a JD but also a CPA, CLU, ChFC and CFP.
“I argued that this was unsound reasoning,” he recalls, but the clients still held off.
That propelled him to do something about it. As it turns out, he collaborated with Clarica Life Insurance Company of Fargo, N.D., to develop a survivorship policy that fits the current climate.
That product–Wait & See Survivorship Universal Life–has now debuted in most states. Its a single premium UL, written on two lives, that pays proceeds upon the second death. It allows owners to get their initial premium back at the end of a 10- or 15-year “wait-and-see” period. If they dont exercise the option, they can then continue the UL at current rates and charges.
In its first three months, Wait & See has already had sales, and several cases are now pending in underwriting, says Daniel E. Peterson, vice president-sales and marketing for Clarica.
Average case size is over $2 million, he adds. (Minimum face is $250,000.)
To what does Peterson attribute this interest?
This is a “short-term survivorship life policy” that addresses the uncertainty people are feeling today, he maintains. It lets estate planning clients protect their assets now, but also lets them leave the contract after the first 10 or 15 years–for any reason–and get their initial premium back.
That has a lot of appeal today, says Caramadre, the estate planner, because some clients are “reluctant to sink big premium dollars into a policy they think they may not need in the future” due to changes in estate tax laws.
Traditional survivorship ULs cant meet this need efficiently, contends Peterson, because they are designed as long-term permanent contracts.
Yes, traditional designs do allow liquidity through loans and withdrawals, he allows. But he says theyre not built with the short term (i.e., the ability to get your money back after 10 or 15 years) in mind.
Some other advantages the two executives see for the Wait & See product are:
–”The policys single premium design allows the company to offer clients a high death benefit compared to premium outlay,” says Peterson. (See chart.)