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Maximize your client’s estate

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All of your clients want to increase the value of their estate. A wealth transfer strategy can help them accomplish this goal.

This strategy may be best suited for:

  1. Clients who want to leave more wealth to their heirs or favorite charities.
  2. Clients with assets that they do not anticipate using during their lifetime.

The philosophy behind the wealth transfer strategy is:

  • To preserve your clients lifestyle
  • To protect your clients hard-earned savings
  • To maximize what your client can leave to their heirs
  • To minimize the tax burden their heirs will be faced with as their wealth transfers to them

Your clients always have two beneficiaries in their estate:

  1. Their heirs
  2. The IRS

Estate tax planning is very important to preserving your client’s wealth for their future generations. Knowing your client’s potential estate tax liability is a great place to start their estate tax plan. In 2001, new rules were passed that reduced estate taxes and completely eliminated them in 2010. Unfortunately, the reform was not permanent and expired in 2010. In 2010, the “Tax Hike Prevention Act of 2010” created a new $5 million exemption (no tax on estates smaller than $5 million) and a top estate tax rate of 35 percent. Similar to the original reform passed in 2001, this law is not permanent. It will expire at the end of 2012. At that point we return to the 2001 exemption of $1 million and a top rate of 60 percent. Bankrate’s estate tax calculator may be helpful in helping your clients develop a plan to reduce or eliminate estate taxes on their estate.

Three asset classes in an estate are:

What makes life insurance federal income tax free? According to Treasury publication 525, Life insurance proceeds paid to you because of the death of the insured person are not taxable…” 

What can a wealth transfer/life insurance plan do for your clients?

  • Immediately increase the value of their assets
  • Increased values are fully guaranteed
  • Increased values are free from market risk
  • No federal income taxes
  • Available cash for long-term care
  • No probate costs
  • Proceeds transfer rapidly; no delays
  • Unlike a will, their beneficiary designations cannot be contested

A wealth transfer plan can give your client a significant head start on what they will leave to their heirs. Just look at the immediate increase in this sample estate compared with keeping these funds in accounts like a safe, secure CD, mutual fund or stocks.

A wealth transfer plan can help your clients lock in or increase their existing values while eliminating market risk.

A wealth transfer plan can make your client’s interest more interesting.

Take an example of a female, age 65. She has $178,571 earning 3.5 percent or $6,250 a year.

Each year after taxes she uses her interest to purchase a wealth transfer/life plan. This adds an additional $139,000 to her estate income-tax free. This is an increase of 78 percent.

A wealth transfer/life insurance plan can free up valuable dollars while still accomplishing your client’s goal of leaving assets to their loved ones.

For example, say there is a $100,000 asset earmarked to be left for heirs. Of that, $55,250 is transferred to a wealth transfer/life insurance plan with $44,750 freed up for the client’s use. This wealth transfer/life insurance plan creates an immediate benefit value of $100,000 income tax free.

A wealth transfer/life insurance plan can immediately maximize the value of the assets your client leaves to those they care about most.

This method may not be right for all clients. Which of your clients will this concept be right for?

For more from Lloyd Lofton, see:


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