Industry Should Consider Education Campaign On Estate Tax Repeal
The life insurance industry should consider a major public education campaign to alert its customers to the realities of the ephemeral estate tax repeal recently signed into law.
A loud and clear message that the word “repeal” does not mean what it says in this context is vital not only for the well-being of the industry, but for consumers as well.
It is hard to imagine a more tragic result of the illusion surrounding the estate tax provision in the $1.35 trillion tax reduction bill than consumers mistakenly believing they no longer have to worry about estate planning.
Policyholders may allow carefully designed life insurance policies to lapse, or delay the purchase of life insurance to their own detriment, unless they are forced to face up to the reality that the estate tax will not actually be repealed permanently.
It will only be suspended for one year before coming back with a vengence on Jan. 1, 2011, absent new legislation.
This is particularly important in the life insurance context. Delaying the purchase of life insurance could force consumers to bear unnecessary costs, since the protection will cost more for older purchasers.
And of course, some consumers may become medically uninsurable in the interim, thus undermining any effort to use life insurance to protect an estate.
The problem is that without an ongoing effort to remind consumers about how the new estate tax law is structured, the sunset provision that will bring the tax back into existence may quickly be forgotten.
There were certainly some articles in the general news media mentioning the sunset provision, but by and large, the references were made only in passing.
For the most part, the news media told only half of the story. They discussed repeal of the tax without discussing the sunset provision.
Moreover, as time passes, interest in the tax bill will naturally fade. Both the media and the public will move on to more immediate concerns, and will not spend a lot of time thinking about a time bomb that will explode 10 years from now unless someone brings it to their attention.
As the one industry with an ongoing interest in estate planning, life insurance must assume the responsibility of not allowing the public to ignore the realities.
Certainly, estate planning professionals will discuss these issues with their clients during personal visits. But it is easy to imagine that some clients who mistakenly believe the estate tax will disappear permanently will decline to meet with agents or ignore their advice.
While these one-on-one efforts of agents are key, they should be supplemented by a public campaign by the industry as a whole.
This could include visits with the general news media seeking feature coverage of the implications of delaying estate planning in this environment, press conferences and an advertising campaign in publications aimed at these consumers.
Moreover, this effort should be sustained for as long as necessary until consumers understand clearly what is at stake if they delay estate planning too long.
It is unfortunate that Congress placed both consumers and the industry in this situation by its deceptive estate tax provision. But it is up to the life insurance industry to try to make things right.
The fact is, if this industry does not do it, no one else will.
Reproduced from National Underwriter Edition, June 22, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.