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BSMG Blog: Protecting the Future of Families and Businesses

Family Limited Partnerships vs. Irrevocable Life Insurance Trusts


Which entity to own life insurance?

The popularity of the irrevocable life insurance trust (ILIT) is well documented. Billions of dollars have been gifted by estate owners to single life and survivorship life irrevocable trusts to help fund the payment of federal estate taxes. Yet, a number of disadvantages revolving around lack of flexibility and lack of control discourage the use of such trusts in certain situations. When estate owners realize an irrevocable trust cannot be changed, they sometimes decide to think about it. Or when estate owners realize they don't own the cash value of the policy and have no access to it for lifetime financial needs, they feel a loss of control.

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5 Steps to Transition to Advanced Markets

Are you ready to take your career to the next level and break into advanced markets?

With few hours in a day, it can be tempting to trade traditional and individual life insurance business sales for more advanced markets, where the bottom line is often notably increased and the cases more intricate. Why would you spend the same amount of time for a less prosperous and sometimes more routine result?

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Advanced Sales: The Need for Life Insurance Other Than to Pay Estate Taxes

An experienced financial professional should keep their clients informed of the many different roles life insurance can play to meet financial, retirement, and protection needs.  The American Taxpayer Relief Act of 2012 (ATRA) permanently increased the federal estate tax exemption.  This increased and indexed exemption may reduce and possibly eliminate the need for life insurance to pay estate taxes on a case by case basis.

The 2016 federal exemption is now indexed to $5,450,000 for an individual and $10,900,000 for a married couple.  The federal estate tax rate is a flat 40% for taxable estates above the exemption amount.  Many clients who may have been exposed to federal estate taxes in the past may no longer need to worry about federal estate taxes in the future because of this very high exemption.  Very, very few individuals and couples have a net worth in excess of these federal exemption amounts.  Only the super-wealthy still face the daunting task of paying federal estate taxes.

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Taxation Of Policy Sales To Life Settlement Companies- BSMG's Russell E. Towers

Taxation Of Policy Sales To Life Settlement Companies

When a life insurance policy is sold to a life settlement company, certain tax rules must be followed by the policy owner/seller.  This taxation is governed by Rev. Rul. 2009-13 where the IRS contrasted the taxation of a policy which has been surrendered with the taxation of a policy which has been sold to a settlement company.

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Are you protecting your international clients from costly estate taxes?

In the wake of Brexit, and its impact on the global economy, we thought it fitting to share with you some key questions for current or potential foreign national clients.

Did you know that your foreign national clients may be subjected to large U.S. federal estate and gift taxes?

Foreign Nationals who do not permanently reside in the U.S. but who have assets here cannot take advantage of some of the tax provisions available to U.S. citizens and resident aliens. When a person with these circumstances, who did not plan, passes away they could owe a large estate tax bill. Talking to your clients about planning, and asking them the right questions will help to protect them and their loved ones in the future.

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Trusts Aren't Just For The Carnegies & Rockefellers

Trusts are not exclusively for the ultra-affluent. They can play a vital role in outcomes-based planning for many individuals. Behind the accumulation of wealth lie personal objectives and values as unique to your clients as their fingerprints. Whether their goal is to fund a comfortable retirement, take care of children or grandchildren or make a meaningful social impact, trusts can play a valuable role in helping them to achieve those objectives.

Advanced Planning: Grantor Trusts & the "Power of Substitution"

As important planning tools, trusts can offer your clients asset control, legacy protection, financial privacy, probate avoidance, and estate tax mitigation.

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5 Guidelines for a Successful Section 1035 Exchange

What Financial Advisors Need to Know

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3 Steps to Business Succession Planning for You & Your Clients


Have your clients considered what will happen to their business when they are no longer actively involved? Have you talked to your clients about who will take over - their partner, children, a key employee or competitor? Are they aware of strategies to ensure a fair price if a sale needs to be made quickly? 

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What To Do With An ILIT When the Estate Is No Longer Taxable

Ask yourself this important question... 

Since the federal estate tax exemption is $5.43 million (single) and $10.86 million (married), does paying premiums for life insurance owned by an Irrevocable Life Insurance Trust (ILIT) that was purchased years ago when the estate tax exemption was much lower make sense anymore?

Are there other important retirement and protection needs that could be covered with the annual premium that has been gifted to the ILIT for many years? 

A current no-lapse single-life universal life (UL) policy or no-lapse survivorship universal life (SUL) policy may still provide a good internal rate of return (IRR) on death benefit at life expectancy. And the pre-tax equivalent is even better because the life insurance death benefit is income tax free. However, the federal estate tax exemption may have only been between $1,000,000 and $2,000,000 when the trust-owned policy was purchased and it made sense at the time to offset projected estate taxes with estate tax free insurance owned by the ILIT.

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Advanced Sales: Leveraging Social Security Benefits With Life Insurance

High-net-worth individuals (HNWI) who are thinking of retirement may not need their Social Security retirement benefits to cover their fixed costs of living.

They may have other sources of income such as rental income, defined benefit pensions, K-1 “pass-through” income from ownership of S Corps or LLCs, required minimum distributions from IRAs, and other investment portfolio income. Whether they retire at the full Social Security retirement age of 66, or wait for a maximum benefit at age 70 to take advantage of a payout that may be over 30% higher than what they would have received at age 66, these clients will have to decide where to place their after-tax Social Security benefits.

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