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5 March Madness estate planning tips

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The NCAA college basketball tournament is just around the corner. It follows a single-elimination format with all games played at neutral sites. You can throw out computer rankings, sportswriter opinions and talk-radio hyperbole. The tournament is elegant in its simplicity and objectivity.

The insurance advisor practicing in the estate planning market could learn a thing or two from the college basketball tourney. As an advanced sales attorney consulting on hundreds of estate planning cases, I have drawn some parallels between estate planning insurance advisors and college hoops. Read on for five lessons that apply to both.


The full-court press is risky

Just a few college teams have enjoyed tourney success employing the full-court press. Arkansas brought the heat with “40 Minutes of Hell,” and Virginia Commonwealth is known for its “HAVOC” defense. No doubt, the full-court press can reap big rewards. It can also lead to easy points by the opponent and a burned-out defense. The stakes are high with the full-court press.

More than a few agents have attempted the estate planning full-court press. They often call me after their case has stalled. They explain to me how they completed several fact-finding sessions, gathered all relevant estate planning documents and identified the other advisors. (So far, so good.)

The advisor then proceeds to describe, in great detail, the gorgeous, personalized, leather binder they presented to the client with a comprehensive plan requiring five techniques and four insurance products. Every technique and product recommendation was directly on point. The advisor is surprised that the client wants to “think it over.”

See also: They’ll buy — if you don’t sell

With few exceptions, people are overwhelmed by the full-court press. Some are simply turned off. The advisor needs to back off the press. In nearly all cases, it is best to help your client see one dribble, one pass and one shot at a time. Gather data, discuss objectives and help your client prioritize.

Educate your client, one concept at a time. First, hit your lay-ups (e.g., estate liquidity and income replacement) and later move on to the tomahawk slam (e.g., discounting techniques, grantor trusts). Save the thick binder for all of the glowing testimonial letters you will compile from satisfied clients.

(AP Photo/Steve Helber)

AP Fab Five

Prevent turnovers; always play in the moment

A key turnover late in the game cost the 1982 Georgetown Hoyas a shot at a national championship. Chris Webber’s improper timeout sunk Michigan’s chances in 1992. In the 1983 finals, nobody from the University of Houston boxed out N.C. State’s Lorenzo Charles in the final seconds — the rest is history. Each incident was a simple mistake where a player took his head out of the game for just a split second. It can happen to insurance and financial advisers. Consider three common examples:

  1. Mom takes out a life policy insuring Dad. Mom is the policy owner. The death benefit is intended for their 9-year-old daughter, so they name their daughter the primary beneficiary. Foul: At Dad’s death, Mom is making a taxable gift to the daughter. This is the classic Goodman tax trap (different owner, insured and beneficiary).
  2. Facing potential estate taxes, Jane is in the process of establishing a life insurance trust. She is anxious to get the life insurance coverage in force, so her agent has the policy issued to Jane and explains that she can gift the policy to the trust after it is drafted. Foul: IRC Section 2035 three-year-rule of estate inclusion applies. If Jane dies within three years of gifting the policy, the death benefit is included in her estate.
  3. Joe’s mother passed away this year, leaving him her IRA. Joe’s mother was 84 years old. She had not taken her required minimum distribution for the current year. Joe has heard about the stretch IRA concept. His advisor explains that Joe may stretch IRA distributions over his remaining lifetime as long as he begins taking RMDs next year. Foul: Failure to take an RMD from the decedent’s IRA in her year of death results in a 50 percent penalty.

The good news is that most planning mistakes are easy to avoid and can be remedied if caught in time. Keep your eye on the ball and your head in the game.

(AP Photo/file)

AP Magic Johnson

Point guard excellence: A sweet 16 prerequisite

Bobby Hurley, Magic Johnson and Greg Anthony — all three point guards were champions. However, great point guards never play in a vacuum. They bring out the best in their teammates. Advisors who excel in the estate planning market have the ability to bring out the best in attorneys, accountants and other members of the planning team.

In my experience, the insurance advisor is usually the catalyst who gets the case moving. Why is this? I suspect it is because other advisors on the team (accountant, attorney, trust officer) tend to be transactional. By contrast, the insurance advisor often has a close, personal relationship with the client. Most insurance advisors I know are connectors. They are excellent at building relationships and finding common ground. In many cases, the client sees the insurance advisor as the go-to person for all types of personal, financial and estate planning questions.

Use your gifts and relish your time at the point, but remember to pass the ball when appropriate. I once had a case where an insurance advisor repeatedly asked detailed split-dollar drafting questions. I suspected the agent was assisting the client with drafting a homegrown plan and treading perilously close to the unauthorized practice of law. Although split-dollar appeared to be a sound planning choice, the case died when the client’s long-time business attorney got wind of what was going on.

You must learn the other players and respect long-standing relationships because they can make or break your case.

(AP Photo)

AP Duke University

Sometimes you have to draw the charge

Duke University is regarded as one of the best-coached teams in any sport. The Blue Devils are drilled on simple, fundamental play — nothing flashy, just solid execution. One of their notable strengths is the ability to stand their ground on defense and draw charges (much to the chagrin of some opposing coaches and sports columnists).

Working with other advisors is not a contact sport. There are cases; however, where you need to stand your ground to protect your clients’ best interests. For instance, experienced insurance advisors generally refuse to provide life insurance planning options or opinions until they have had an opportunity to review the client’s estate planning documents. Their rationale is simple: how can they help point the client in the proper direction if they do not know the client’s starting point?

See also: Trusts and LLCs: Mind the details

To perform document review, an insurance advisor either partners with local counsel or works with a carrier’s advanced sales attorneys to decipher the documents. Document review helps ensure the delivery of appropriate insurance and annuity recommendations. It may also uncover other previously hidden opportunities.

(AP Photo/Gerry Broome)

AP Robertson

Master the triple double

The discussion of the triple double begins and ends with the University of Cincinnati’s Oscar Robertson (pictured above at right, kneeling). Double digits in points, rebounds and assists, the Big O tallied lots of triple doubles. He was the complete package. End of story.

From a tax planning perspective alone, permanent life insurance is the triple double of estate planning: (1) income tax-free death benefit (IRC Sec. 101(a)(1)); (2) tax-deferred cash value buildup (IRC Sec. 7702); and (3) the ability to remove death proceeds from an estate (IRC Sec. 2035). We must all work hard to protect these three thin threads of life insurance because no other estate planning products or solutions offer so many efficiencies.

When you add the non-tax advantages, such as permanence, leverage, cash value flexibility, self-completion of the death benefit and payment timeliness, you have an all-around performer in permanent, cash value life insurance. When you work in the estate planning market, term insurance should be an absolute last resort.

You do not have to be an All-American basketball player to achieve greatness in the estate planning market. You do, however, have to be knowledgeable and passionate about permanent life insurance. Now go get ‘em!

(AP Photo)

For more on estate planning, see:

Adding flexibility to estate plans

Trusts and LLCs: Mind the details

The road ahead for estate planning


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