Last month marked Douglas Peete’s final original column for Senior Market Advisor. SMA wants to thank Peete for his contributions to the magazine over the past year. His life insurance strategies have helped advisors and their clients save on taxes, ensure smooth business transition and protect against economic loss at death. This column is a compilation of Peete’s ideas and strategies. We will debut a new columnist in the September issue. Stay tuned.
For many seniors, giving to charity is a way to give back after a lifetime of prosperity. Peete offers a strategy for that. “In today’s economic environment, we need to find new ways to enhance our clients’ financial positions while creating strategies that reduce taxes and making substantial charitable gifts. The variable life-donor advised fund combination is a powerful concept that can continue to be attractive to high-net-worth individuals.”
For the details on how to use the variable life-donor advised fund combination, see SMA, August 2005, page 52.
Advisors who have senior business owner clients may want to check out the March 2006 issue of SMA, page 50. In his column that month, Peete writes about 412(i) plans, which allow business owners to “accumulate substantial retirement funds in a short period of time … The 412(i) plan is a defined benefit plan that is exempt from the funding standards under section 412 of the Internal Revenue Code. The 412(i) plan is funded with life insurance and annuity products that guarantee a minimum fixed rate of return.
Contributions are determined based on the insurance product guaranteed interest rate as opposed to an assumed interest rate.” Peete says custom designed plans require the use of an enrolled actuary. Take a look at the column and find out more.
Protect key people
Senior business owners can be affected adversely if a key employee dies unexpectedly – especially one who is responsible for a great deal of the company’s success. Retirement plans can be shattered by an untimely death. So Peete recommends key-person insurance.
“Key-person insurance can provide the business owner with the funds necessary to recover lost earnings, as well as recruit and train a replacement employee. In some cases, key-person insurance can be used to fund executive benefit programs.”
For the full story on how senior business owners can protect themselves with key-person insurance, see SMA, December 2005, page 48.
Families faced with the prospect of a parent or grandparent dying are usually faced with sizeable medical bills. That financial burden can be alleviated, Peete says, through the use of accelerated benefits. He says some companies offer them on existing and new policies, while others limit them to new policies only.
“Accelerated benefits provide an alternative to surrendering a life insurance policy for its cash value, causing a loss of death benefit. The accelerated benefit may advance up to 75 percent of the policy’s face amount. The amount of the death benefit advance, plus accrued interest, will be treated as a lien against the accumulated value and death proceeds of the policy…”
Peete offers a more complete explanation in his April 2006 column, page 46.