Many boomer business owners are going to be looking to plan their exit strategies in the short years ahead. With careful analysis and evaluation, a well-planned strategy can help ensure they leave a legacy for their families and communities.
Survivorship universal life insurance offers the potential to lengthen, or extend, that legacy as well. As the case study below demonstrates, SUL can take a generous plan for charitable giving and transform it into a self-sustaining legacy for the future.
But well before contemplating charitable giving, important considerations must be addressed. A “planning pyramid” can help.
Such a pyramid starts with a solid foundation and builds on it from there. In this case, the foundation first and foremost must consider the financial needs of the client and spouse (Generation I) and the risks they face.
Next build a “buffer” (surplus) around each to help ensure those needs are sufficiently protected. Has inflation been factored in? Expected rate of return? Has the risk of longevity been considered and addressed?
Example: To buffer the risk of longevity, formulaic life expectancy may be to age 87, but you may want to consider assuming client and spouse both live to age 100. What about the bite of income tax (buffer 40% vs. 50%)?
The next level of the planning pyramid comes into play only after sufficient preparation has been done regarding the financial security of client and spouse. Said another way, attempting to address the needs of family members or philanthropic goals without first assuring the needs of Generation I are met is folly.
At the second level of the pyramid, clients should review and consider the needs of the rest of their immediate family, including children or extended family members they wish to ensure are financially cared for in the future, as well as provision for nieces, nephews, grandchildren, elderly parents, or close friends.
This is the time for the boomer to focus on growing estate tax concerns, asset protection strategies, business-succession planning and exit strategies.
The top tier of the planning pyramid comes into play after the plans to protect loved ones are solidly in place. It is time to discuss the impact of planned giving.