Transcript Business Planning Workshop

Business Planning
Workshop
For Producer or
Use
Only.
for Public
Distribution.
ForBroker/Dealer
Broker Dealer Use
Only.
Not Not
for Public
Distribution.
Overview
• The Lifetime Sale
• Going Public
• Going Private
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
The Lifetime Sale - The Situation
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
The Lifetime Sale - The Situation
• Tom & Mary Smith are 55 & healthy
• Tom is the sole owner of TOMCO & earns
approximately $300,000
• TOMCO will be sold during the next year for
approximately $50 million
• The couple has a net worth of $10 million & $3
million of term insurance owned by an irrevocable
trust (ILIT)
Hypothetical example. Actual results will vary.
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
The Lifetime Sale - Planning Objectives
• Sell the business for the highest price
• Provide for lifetime income needs during life &
survivor income needs
• Transfer wealth on a tax-efficient basis to their 3
adult children
• The couple is not charitably motivated
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The Lifetime Sale- Key Issues
• What type of business life insurance needs do you
see?
• What type of gift and/or estate planning
recommendations would you make?
• What type & how much coverage would you
recommend?
• How should this coverage be owned & funded?
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Going Public-The Situation
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Going Public-The Situation
• Triangle Technologies Corporation (TTC) has just
gone public
• TTC sold 4 million shares at $12 per share & the two
founders each sold 1 million shares
• The founders are in their 40’s and each have a
personal net worth each of $75 million & each earns
$250,000 plus stock options
• Each founder owns $10 million of term & $20 million
of coverage on each other’s life previously used for
a cross-purchase arrangement
Hypothetical example. Actual results will vary.
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Going Public- Planning Objectives
•
•
•
•
The primary TTC objective is profitable growth
Recruit, reward & retain top talent
Review TTC business insurance needs
Review the estate planning & life insurance needs of
the two founders
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Going Public - Key Issues
• How much & what kind of business life insurance is
needed?
• Should TTC purchase coverage upon the life of any
of its key employees or directors?*
• What are your recommendations as to their personal
life insurance needs in light of the existing $20
million cross-purchase coverage & the $10
personally-owned coverage?
* To ensure that the death proceeds of an employer-owned policy retain income tax favorable characterization, it is essential to
comply with the requirements of Internal Revenue Code Section 101(j).
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Going Private - The Situation
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Going Private - The Situation
• The management of MMC wants to take the $200 million
•
•
•
•
dollar company private
The management buy-out offer is being reviewed by a
Special Committee For Fairness
After the transaction, MCC management will own 20% of
the equity and the remainder will be owned by an
investment firm
The CEO will own 10% of the equity, earns a salary of
$400,000 plus a bonus (200-400K)
The CEO has $800K of group term & an under-funded
$1M universal life policy
Hypothetical example. Actual results will vary.
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Going Private - Planning Objectives
• The primary objectives of management are to close
the transaction & to minimize business disruption
• MMC wants to review its executive benefit needs to
retain its top 3 people
• The CEO of MMC is interested in reviewing his
estate planning & personal life insurance needs
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Going Private - Key Issues
• What type of business insurance needs can you
identify?
• What type of executive benefit programs might you
recommend?
• What type of buy-sell planning seems appropriate?
• What type of estate planning & personal life
insurance recommendations might you consider?
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Important Information
The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010
(“Act”) impacts the federal gift, estate and generation skipping transfer tax (together
referred to as “transfer tax”) through 2012. Among other changes, the Act temporarily
establishes maximum exemption amounts of $5,000,000 per person for transfer tax
purposes, establishes a maximum transfer tax rate of 35% and provides for portability of
the estate tax exemption between spouses. These changes, however, are only in effect
through December 31, 2012. Unless Congress enacts new legislation, on January 1,
2013 the transfer tax laws will revert back to the laws (e.g. exemption amounts of
$1,000,000 and generally 55% maximum tax rates) that were in effect in 2001. Future
changes in transfer tax exemption amounts and transfer tax rates may impact the
appropriateness of any transfer tax planning strategy or product sale. Clients need to
understand that tax law is always subject to interpretation and legislative change.
MetLife and its affiliates do not provide tax advice and therefore clients must speak with
their qualified legal and tax counsel regarding their current estate plan and what planning
options are available and appropriate.
For Producer or Broker/Dealer Use Only. Not for Public Distribution.
Important Information
Pursuant to IRS Circular 230, MetLife is providing you with the following notification: The information contained in this document is not
intended to (and cannot) be used by anyone to avoid IRS penalties. This document supports the promotion and marketing of insurance
products. Your clients should seek advice based on their particular circumstances from an independent tax advisor.
MetLife, its agents, and representatives may not give legal or tax advice. Any discussion of taxes herein or related to this document is for general
information purposes only and does not purport to be complete or cover every situation. Tax law is subject to interpretation and legislative change.
Tax results and the appropriateness of any product for any specific taxpayer may vary depending on the facts and circumstances. You clients
should consult with and rely on their own independent legal and tax advisers regarding their particular set of facts and circumstances.
Prospectuses for Equity Advantage Variable Universal Life, and for the investment portfolios offered thereunder, are available from
MetLife. The policy prospectus contains information about the policy’s features, risks, charges and expenses. The investment
objectives, risks and policies of the investment options, as well as other information about the investment options, are described in
their respective prospectuses. Clients should read the prospectuses and consider this information carefully before investing. Product
availability and features may vary by state.
MetLife life insurance policies have limitations, exclusions, charges, termination provisions and terms for keeping them in force. There is no
guarantee that any of the variable investment options in this product will meet its stated goals or objectives. The cash value is subject to market
fluctuations so that, when withdrawn, it may be worth more or less than its original value. Guarantees are based on the claims paying ability and
financial strength of the issuing insurance company.
Life insurance products are issued by MetLife Investors USA Insurance Company, Irvine, CA 92614, in all jurisdictions except New York, where
permanent life insurance products are issued by Metropolitan Life Insurance Company. New York, NY 10166 and term life insurance products are
issued First MetLife Investors Insurance Company, New York, NY 10166. All guarantees are subject to the claims-paying ability and financial
strength of the issuing insurance company. Variable products are distributed by MetLife Investors Distribution Company, Irvine, CA 92614. All are
MetLife companies. August 2011
Life Insurance Products Are:
• Not A Deposit • Not FDIC-Insured • Not Insured By Any Federal Government Agency
• Not Guaranteed By Any Bank Or Credit Union • May Go Down In Value
BDVL21689 L0811199408[0813]
©2011 METLIFE, INCPEANUTS © 2011 Peanuts Worldwide
For Producer or Broker/Dealer Use Only. Not for Public Distribution.