Cautions When Combining SPIAs And Life Insurance Contracts
When marketing a single premium immediate annuity with a life insurance contract, there is a threat that the IRS may combine the two contracts, endangering the tax-free status of the life insurance death benefit, says John W. Homer, president of Oxford Financial Group, Salt Lake City.
Here are some steps that Homer feels agents must follow when applying this sales concept:
–Never purchase the SPIA and the life insurance policy simultaneously. The life insurance should always be purchased first. When possible, agents should leave a month or two between the two purchases.
–Use different companies for the SPIA and the life insurance policy. Do not fund the insurance policy directly from the annuity. Pay the first-year premium of the insurance policy with cash that does not come from the SPIA.
–Purchase more life insurance than the amount of premium paid into the SPIA.