Transcript Document

Survivor Universal Life
Presented by…
Levi Robinson, CLU, ChFC, FLMI
Director Product & Market Training
FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC
Agenda
 Why Survivor Universal Life Insurance?
 Sales Applications
 American General’s Survivor Products
 Which One To Use?
 Product Differences
 Estate Planning 101
 Optionality
 Questions?
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What is Survivorship Life
Insurance?
 This type of life insurance is a single policy
that covers two lives.
 It pays the death benefit after both of the
people insured have passed away and is
typically more affordable than purchasing
two individual policies.
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What is Survivorship Life
Insurance?
 Life insurance is the least expensive method for
providing cash for the payment of estate taxes.
 Since 1981, the law allows one spouse to transfer all
their property to the other spouse at death tax free.
 This is the “unlimited marital deduction”.
 If there is an estate tax due, it is not due until the second
spouse dies.
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What is Survivorship Life
Insurance?
 In response, life insurance companies
designed the survivorship life insurance
contract.
 Since the premium is lower, it can be an
even a better solution than a policy
insuring only one person.
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Sales Applications
Estate Liquidity
Supplemental Cash Flow
Charitable Gifts
Wealth Transfer
Gifts to Grandchildren
Insurance for Special Needs Children
Insuring the Uninsurable
Business Applications
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American General’s Options…
AG Secure Survivor GULSM
Elite Survivor Index ®
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Elite Global Survivor®
Which One?
AG Secure Survivor GUL
Elite Survivor Index
Elite Global Survivor
Primarily used for estate
Primarily used in estate
Useful for estate
planning/wealth transfer
liquidity/wealth transfer
planning/wealth
market where guarantees
sales where index
transfer market where
and the ability to adjust the interest crediting options death benefit and cash
death benefit without risk to
can potentially help
value growth are a
heirs is important.
reduce premium outlays. priority. Ideal for 1035
Lower cost option for
exchanges.
secondary guarantees.
Short pay scenarios
are quite effective.
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Which One?
AG Secure Survivor GUL
Elite Survivor Index
Elite Global Survivor
Lowest Target
Mid Target
Highest Target
Guaranteed Death Benefit
Non-Guaranteed DB
Lowest Cost
Guaranteed Cash Value
Cash Accumulation
Short Pay Cash
Accumulation
Traditional Estate Planning
Traditional Estate
Planning
Supplemental Income
Planning
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Key IUL Differences
Elite Survivor Index
Elite Global Survivor
Issue Ages
20-90
18-80
Minimum Death Benefit
$250k
$100k
MGP-10
MGP-14
MGP-1
MGP-30
N/A
3.00%
Monthly Guarantee
Premium
Alternative Value
Provision
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Elite Survivor Index
Strategy
Rate
Declared Interest Account
3.00%
Minimum Guarantee
3.00%
Cap Rate Index Account
Cap Rate
10.75%
Illustrated Rate
6.96%
Minimum Guarantee
1.00%
Participation Rate Index Account
Participation Rate
60%
Illustrated Rate
7.60%
Minimum Guarantee
2.00%
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Elite Global Survivor
Strategy
Rate
Declared Interest Account
3.00%
Minimum Guarantee
3.00%
5-Year Index Account
Participation Rate
55%
Illustrated Rate
8.14
Minimum Guarantee
0.00%
1-Year Index Account
Participation Rate
45%
Illustrated Rate
5.35%
Minimum Guarantee
0.00%
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1-Year Index Account
Dow Jones
EURO
STOXX
Hang Seng
S&P 500
Dec 20
1,423.53
4,118.54
19,240.12
Jan 20
1,430.50
4,173.07
20,327.72
Feb 20
1,459.68
4,250.30
20,567.91
Mar 20
1,410.94
4,079.52
19,356.90
Apr 20
1,484.35
4,416.79
20,566.59
X 25%
May 20Weighting
1,522.75= 1.27%
4,480.81
20,904.84
16.66% X 55% Participation Rate =
S&P 500
3.73% Avg Return
Dow Jones EURO
STOXX
5.08% Avg Return
Monthly
Anniversary
Date
9.16% Index Interest Credited
Jun 20
1,512.84
4,545.61
21,684.67
Jul 20
1,534.10
4,445.23
23,291.90
Aug 20
1,445.55
+ = 16.66%
4,173.29
21,595.63
Adjusted Index Return
Sep 20
Hang Seng
20.52% Avg Return
4,366.16
25,701.13
Oct 20Weighting
1,500.63= 15.39%
4,411.26
X 75%
29,465.05
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1,518.75
Nov 20
1,439.70
4,277.24
27,771.21
Dec 20
1,460.12
4,314.70
27,017.09
The Policy Split Option
At anytime while both contingent insureds
are living, this policy may be exchanged for
two individual policies covering the insureds
separately upon the occurrence of certain
events such as divorce or tax law changes.
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FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC
Stability In The Tax Code?
Year
Name of Bill
Years Until Next Major
Change
1939
Internal Revenue Code
15 Years
1954
Internal Revenue Code
20 Years
1974
Employee Retirement Income
Security Act (ERISA)
2 Years
1976
Tax Reform Act of 1976 (TRA ‘76)
5 Years
1981
Economic Recovery Act of 1981
(ERTA)
1 Year
1982
Tax Equity & Fiscal Responsibility
Act of 1982 (TEFRA)
6 Months
1982
Technical Corrections Act of 1982
(TCA ’82)
2 Years
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Stability In The Tax Code?
Year
Name of Bill
Years Until Next Major
Change
1984
Tax Reform Act of 1984 (TRA ‘84)
1 Year
1984
Retirement Equity Act of 1984 (REA
‘84)
1 Year
1985
Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA)
1 Year
1986
Tax Reform Act of 1986 (TRA ‘86)
2 Years
1988
Technical & Miscellaneous Revenue
Act (TAMRA)
1 Year
1989
Revenue Reconciliation Act of 1989
1 Years
1990
Revenue Reconciliation Act of 1990
3 Years
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Stability In The Tax Code?
Year
Name of Bill
Years Until Next
Major Change
1993
Revenue Reconciliation Act of 1993
3 Years
1996
Small Business Job Protection Act of
1996
1 Year
1997
Taxpayer Relief Act of 1997
4 Years
2001
Economic Growth & Tax Relief
Reconciliation Act of 2001
9 Years
2011
The Tax Relief, Unemployment
Insurance Reauthorization & Job
Creation Act of 2010
3 Years
2013
American Taxpayer Relief Act
?
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What About Estate Taxation?
 Estate Free Rules Replaced
 QTIP Allowed for Marital
Deduction
 Unlimited Marital Deduction
 Unified Estate and Gift Taxes
 Gift Tax Repealed
 Portability of Unused Estate
Tax Exemption
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The Estate Tax Exemption?
Decedents dying
in:
Estate Tax
Exemption Amount
Tax Rate
2000-2001
$675,000
55%
2002-2003
$1,000,000
49-50%
2004-2005
$1,500,000
47-48%
2006-2008
$2,000,000
45-46%
2009
$3,500,000
45%
2010
$5,000,000
(or unlimited)1
35%
2011
$5,000,000
35%
2012
$5,120,000
35%
1An
executor of the estate of a decedent dying in 2010 could opt out of the estate tax in exchange for Modified Carryover Basis
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.
Where Are We Today?
2013:
Estate, Gift and Generation
Skipping Tax
$5.25 Million Exemption
40% top Tax Bracket
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What Are People Thinking?
It seems like the tax law
changes constantly
why should I do any
estate planning now?
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Liquidity to Pay Estate Taxes
 Liquidity
 Some Estates are Liquid Enough to Pay
Estate Taxes Owed without Selling Assets
 Other Estates will need to Sell Assets to Raise
Liquidity within 9 months . . . Regardless of
the Current Market for those Assets
 Sometimes forced-sales result in Pennies on the
Dollar
 Most Large Estates Prefund the Estate Tax
Liability with Life Insurance
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Why Life Insurance
 Tax Benefits
 Income Tax Deferred Accumulation during Life
 Income Tax Free Proceeds at Death of Insured
 Liquidity
 Paid in Cash
 Timing
 Paid when Needed
 Financial Product
 Acceptable Return on Investment at Life Exp.
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Life Insurance Trust
 Life Policy Proceeds Included in Estate if it is Personally
Owned
 Life Insurance Trust Typically Established to be Owner &
Beneficiary of Life Policy
 Children, Grandchildren, etc. are Beneficiaries of Life
Insurance Trust
 Life Insurance Trust Provides Liquidity that can be used
for Estate Taxes
 Does not pay tax directly but can loan funds to estate for
payment or buy assets from estate
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Benefits of an Irrevocable Life
Insurance Trust (ILIT)
 Life insurance premiums (annual exclusion gifts)
reduce the estate (Crummy Notice/Present Interest Gift)
 Life insurance can still be used to provide
source of estate tax liquidity
 Long term control of proceeds can be protected
for your heirs
 All life insurance death proceeds OUTSIDE of
your estate
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Policies Transferred to
Irrevocable Life Insurance Trust (ILIT)
 New policies owned by ILIT are estate tax-free
from policy inception
 Existing policies transferred are estate tax-free
after 3 years
 provided there are no retained incidents of ownership
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Four-Year Term Rider
 Estate protection rider provides last survivor term
insurance coverage during the first four policy years.
 The additional death benefit is equal to 125 percent of
the policy’s initial specified amount.
 There is a charge for this optional rider; it can only be
added at issue and terminates after four years.
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Benefits of an Irrevocable Life
Insurance Trust (ILIT)
 $2,000,000 Life insurance in an ILIT
 Means – a net of $2,000,000 to family
 $2,000,000 policy owned by the insured
 Means – a net of $2,000,000 MINUS the
estate taxes
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Traditional Estate Planning Case
Michael (45) owns a successful construction business.
Michael and his wife Jennifer (45) have two children.
Greg age 22 and Nancy age 24 who both work in the family
construction business and who Michael intends to pass the business to
after his death.
Michael & Jennifer have a total net worth of $13,750,000 mainly
consisting of the family’s closely held business; with a potential estate
tax liability of roughly $1,500,000 under current estate tax law.
How will their children pay the estate taxes due upon their parents
death without having to sell the family business?
M45 F45PNT Max Annual Premium Solve $10,557.90 for 10 Yrs $1.5M DB
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The Solution
 Working with the attorney of Michael &
Jennifer you work up a scenario
whereby the attorney establishes an
irrevocable life insurance trust (ILIT) on
behalf of the couple.
 The trust owns and is beneficiary of an
Elite Index Survivor life insurance
policy, with Michael & Jennifer as the
insureds.
 The couple can use a portion of their
annual federal gift tax exclusion
($14,000) to fund the policy.
M45 F45PNT Max Annual Premium Solve $10,557.90 for 10 Yrs $1.5M DB
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How it Works:
The ILIT is the owner and beneficiary of an American General Elite
Survivor Indexed policy.
In this scenario, the required premium for 10 years is $10,558. Which
is less than the couples annual gift tax exclusion.
This premium is projected to support the $1,500,000 death benefit.
Upon the second death, the ILIT can provide the liquidity needed to
help pay estate taxes and transfer costs using proceeds from the policy.
M45 F45PNT Max Annual Premium Solve $10,557.90 for 10 Yrs $1.5M DB
FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC
OptionalitySM
Offer your clients two
opportunities for return of
their premiums with
AG Secure Survivor GUL®
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The Concept

Male and Female, both age 50 preferred non tobacco*

Death benefit $3 million, guaranteed to age 100

Total premium paid in a 10- pay scenario: $343,182
Optionality in action

At the end of year 15 they could choose to exercise the return of premium
feature and receive back $343,182 or

Continue their guaranteed coverage until year 32, when the insureds are
age 82, and their guaranteed cash surrender value is $353,199
* For the State of Texas as of 4/11/2013. Not an actual case, presented for
illustrative purposes only. Guarantees are subject to the claims paying ability of
the issuing insurance company
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Questions
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Policies issued by: American General Life Insurance Company, 2727-A Allen Parkway, Houston,
Texas 77019.. Elite Global Survivor Policy Form Number 08414; Elite Index Survivor Policy Form
Number 08327; AG Secure Survivor GUL Policy Form Numbers 11239, ICC-11239; Enhanced
Surrender Value Rider Form 11990, ICC-11990 Four Year Term Rider Form Number 01904;
Overloan Protection Rider Form Number 07620JT. The United States Life Insurance Company in
the City of New York, One World Financial Center, 200 Liberty Street, New York, New York 10281.
The underwriting risks, financial and contractual obligations and support functions associated with
products issued by American General Life Insurance Company (American General Life) and The
United States Life Insurance Company in the City of New York (United States Life) are the issuing
insurer’s responsibility. All guarantees are subject to the claims-paying ability of the issuing
insurance company. United States Life is authorized to conduct insurance business in New York.
Policies
and
riders
not
available
in
all
states.
American
General
Life
Companies,
www.americangeneral.com, is the marketing name for a group of affiliated domestic life insurers
including American General Life and United States Life.
AGLC106962
© 2013. All rights reserved.
FOR PRODUCER USE ONLY – NOT FOR DISSEMINATION TO THE PUBLIC