As your clients prepare for retirement something strange happens. They begin to divide their money into two “buckets.” First is the money they need to live on during retirement, or “live-on” money. The second is money they intend to leave to someone else after they are gone, or “leave-on” money.
Wealth transfer is all about the “leave-on” money, not “live-on” money. It is for money that the client does not intend to use in retirement. However, this is money that they do not want to give up the control over, just in case they need it in the future. So where do you want to “park” the “leave-on” money until they are either ready to use it or pass it on? Here are the requirements for that money:
- Has an access option
- May provide future growth
Safe. You want the money to be somewhere that is safe. When the client dies you want to be sure their children or grandchildren are guaranteed to get the amount of money the client wanted them to receive. In short you are more concerned about a return of your money, than a return on your money.
Tax-advantaged. The account should be tax advantaged. You don’t want to pay income taxes every year on an account that you plan to give away. Nor do you want your beneficiaries to have to pay income taxes on the account when they ultimately receive the money.
Simple. Starting and keeping the plan should be simple. It should provide “auto-pilot” control, so once you set it up you don’t have to worry about it again. What you see should be what you get. There is no additional work on your part after the initial set up. Again, if you are planning to give the money away you should not have to spend lots of your time managing that money, or getting a bunch of quarterly mailings about the account.
Has an access option. If for some reason you need to use this money at any time you should be able to get to it. After all it may be “leave-on” money today, but we don’t know what the future holds and you may need some of it later on.
The plan may provide for future growth. While you plan to give this money away, it would be nice if it would grow-without a risk of loss-in the future. But getting good growth, no risk of loss and having access options in one account can be difficult to find.
A product that may cover all of these requirements for wealth transfer is single premium life insurance. Yes, life insurance.
Let me be clear about a few things
First of all, while a single premium life may be right for wealth transfer, it’s not the only answer. You may want to consider other ways to do wealth transfer; it takes a meeting with the client to determine if it fits their financial situation and goals.
It’s only for money they don’t plan to use. Wealth transfer is not right for all or even most of their money; it’s just for “leave-on” money. The client wants to keep control over the money and have it pass only at death, not before. They very much want to be sure it is guaranteed and will be there when needed and for the amount planned on. I say again, it’s only for money you don’t need in retirement. We can’t stress this point enough. So let’s see how the single premium life insurance fits the requirements for a good wealth transfer plan.
Safe. The single premium life is backed by the full financial strength of the insurance company.