By Barry Higgins
Salt Lake City
“One of the problems seniors have is the fear of running out of money,” says John W Homer, president Oxford Financial Group, Salt Lake City. “People are concerned about becoming dependent on their children.”
In his session at the National Association of Insurance and Financial Advisors annual conference here last month, Homer discussed some of the issues seniors are facing, and reviewed a sales concept with which he has had success.
“This is for people who need more cash flow and want to avoid estate taxes,” says Homer. “But, this concept is very focused on a specific market–were talking about people generally between the ages of 70 and 90.”
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People in this age group, “live on income or interest off their savings or investments, but they usually do not invade the principal,” says Homer.
The basic premise of the sales concept involves reallocating a portion of a seniors fixed income portfolio into a single premium immediate annuity. “Were working with liquid assets as opposed to real estate,” says Homer.
It is possible to increase a seniors income with an SPIA, and then replace the principal used to purchase the annuity at the time of death through the use of life insurance, says Homer.
However, there are some precautionary steps producers need to take when working with this concept. The IRS has been critical of combining a SPIA with the purchase of a life insurance policy. Homer says that if agents dont take the necessary precautions, the death benefit may be taxable as ordinary income, as well as included in the insureds estateregardless of who owns the policy.