Friday, March 29, 2024
Home Authors Posts by Mark D. Milbrod, CLU

Mark D. Milbrod, CLU

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is a principal of Agent Support Group, a brokerage general agency located in Edison, NJ. This fall will mark his 30th anniversary in the insurance industry. Milbrod's real passion is for the brokerage business, where he assists independent producers by showing them how to open doors, seize sales opportunities and realize new revenue sources.Milbrod sees himself as an insurance producer and knows what it is like to walk in producers' shoes and what it takes to close a sale. He has been a featured speaker at numerous industry events and is the author of the popular blog Mark's Barks. Milbrod also holds the Chartered Life Underwriter designation from The American College.Founded more than 40 years ago, Agent Support Group, a LifeMark Partner Agency, is a leading multi company life insurance brokerage agency with operations in New York, New Jersey and North Carolina. They serve as a general agent for many of America's strongest and most competitive insurance companies, offering a broad spectrum of products to suit many life, annuity, long term care and disability income needs.Milbrod can be reached at Agent Support Group, 343 Thornall Street, Suite 660, Edison, NJ 08837. Telephone: 732-917-6081. Email: mark@asglife.com.

There Are Worse Things In Life…

“There are worse things in life than death. Have you ever spent an evening with an insurance salesman?”

That is a quote from Woody Allen. Although it is funny, it is an unfortunate stereotype that is often attached to insurance salespeople. If you want to clear a room fast, just say that you sell life insurance. That often does the trick (and a few people may be trampled by others as they make a break for the exit door in the room).

I get it. Selling life insurance doesn’t exactly have people flocking to you to buy it. In fact, the mere thought of talking about one’s mortality is tough and people just don’t want to discuss the subject. I always go back to the beginning of my career. I started, as many of us did, at Prudential. In those early days as a rookie life insurance agent, I was told by some of the old time veteran agents that I would never understand this business until I delivered my first death claim. Well, fast forward six years from that point and wow, I really understood the business. Delivering that death claim check to a 41 year old widow with two young children was quite a powerful point in my career.

It hit me really hard as I now understood the true impact that we, as insurance agents, can have on the peoples’ lives that we touch. As I have moved on in my career, I am now that “old-time veteran agent” that has the wisdom to pass on experiences to others that are either new to the profession or may simply need a reminder.

One of the things that always gets to me is the “Go-Fund Me” social media posts that are telling us about a horror story that just took place. Often it is for a young parent leaving behind a spouse and young children. These Go-Fund Me pages are looking for money to help a family in need. Another young widow similar to the story surrounding my first death claim. I often wonder when I see these posts come up if the family had life insurance. Why are they needing a community to rally around them to put the pieces back together? After all, isn’t life insurance the original Go-Fund Me page?

There are far too many of those stories and although all of the money in the world can’t bring someone back, it’s comforting to know that a life insurance policy can be so many things:

  • Instant funds to pay off a mortgage that will keep a family in their homes.
  • Replacing income lost from a bread winner’s passing.
  • Funds for a college education.
  • Provide a secure retirement for a surviving spouse.
  • And overall financial security.

Yes, Woody Allen was correct. There are worse things in life than death. And that would be dying without life insurance. Perhaps spending the evening with that insurance salesman is not such a bad idea after all.

The New Year And The True Cost Of Waiting

Reflection. Something we do every year around this time. We are ushering out an old year and welcoming in another. 2021 was once again a challenging year for all of us as we are still working through this pandemic. For some of us, personal issues also came into play this past year.

I would like to share my story. My father, who is 83 years old, suffered a horrific injury back in June. A man who was independent his entire life was suddenly dealing with the harsh reality of losing that independence. The injury he endured took him through a journey that would see several hospital stays, multiple trips into rehab and ultimately into an assisted living facility. My brothers and I worked tirelessly to put the pieces back together for him (and for us as a family).

For years, I have been advocating the importance of the many products we sell. Although I was a strong believer in what I would preach, there is nothing more humbling than to live it from the other side.

We went through the various stages of “the process.” We experienced first hand the ridiculous Medicare system. It is truly a game that is not for the weak at heart. The very system that is supposed to protect you oftentimes can act as your largest obstacle. Our goal was to avoid Medicaid as an option. With that, you have very little control over a loved one’s future. In our situation however, we had some light at the end of the tunnel. We had purchased a long term care policy many years ago. After navigating the maze for several months, we finally reached the end of the Elimination Period of his policy. With that, the world opened up.

Although it entailed a move out of state, we were able to put a plan in place that utilized my Dad’s modest income, which included a small pension and his Social Security benefits. When you add in the monthly benefits from his long term care policy, the plan we put into place ensures him, despite his new physical limitations, a life full of the dignity that he deserves.

I am sharing this story as a way to stress the importance of what it is we do for a living…we change lives. A chill goes down my spine when I think of what would have been if not for the long term care policy. I would have been “the shoemaker with holes in my shoes.”

I urge you to look at your personal situations. Do you have a plan in place? What will your children have to endure if something happens to you? Will you be that shoemaker?

Take this as a lesson and a story to bring to your clients the next time you are pitching them about the importance of the planning process. I was truly humbled by living in the fishbowl instead of just looking in from the outside.

We have all spoken about the Cost of Waiting to our clients. Perhaps you highlighted the cost increase a year or two from now, but the true cost of waiting is not being able to do anything until it’s too late.

As we say goodbye to 2021 and welcome in 2022, let’s take a hard look at the stories that are not written yet. Be more purposeful with your clients. As I write this, the news hit the wire about John Madden’s death. One of his famous quotes was:

“The only yardstick for success our society has is being a champion. No one remembers anything else.”

Be that champion to your clients and their families.

Wishing you all a very healthy, safe and happy 2022.

Gentlemen, This Is A Football

At the start of training camp in 1961, Vince Lombardi walked into the locker room of the Green Bay Packers and said to his team what would become one of the most iconic quotes in sports history… “Gentlemen, this is a football.”

Vince Lombardi was a Hall of Fame football coach, an NFL executive and the head coach of the Green Bay Packers during the 1960’s. He led the team to three straight and five total NFL Championships in a seven year span. The Vince Lombardi Trophy is awarded to the winner of the Super Bowl each year.

The iconic words spoken by him were all about getting back to fundamentals. Without them, regardless of what profession we are in, we can easily lose sight of our core values. Our industry is one that sees many changes but, as that change happens, it is often a very slow process. The life insurance industry is analogous to a large ocean liner. In order for that ship to make a turn, it’s a slow, tedious process. In our industry changing course normally takes years to complete. Today, however, we are seeing huge changes happening virtually overnight.

As we continue to live in our pandemic stricken world, we, as insurance professionals, have been given an amazing gift. Carriers have adopted new procedures in underwriting utilizing various technologies. We are able to provide needed insurance products for our clients without a physical exam, blood draw or urine sampling. In addition, we are able to procure very large face amount limits—as high as $5,000,000 in some cases. To not seize this opportunity is doing our clients a tremendous disservice.

But the larger lesson that we should be learning from the current situation is the fundamentals of what it is we do for a living. We provide life insurance. Life insurance can be defined in many ways and when we all first started in the business, we were most likely making the sale sitting across a kitchen table.

We spoke to young couples who had just started out in life. Perhaps they purchased their first house and we talked about the “what if” scenario. Will you have enough money to pay off your mortgage? We would fast forward a few years and that same couple were now starting a family and that “what if” changed. Now we are talking about providing the extra income for their families to continue on and not be uprooted from that house they built into a home. Or better still, making sure that college funds would be available if that “what if” scenario happened.

On the brighter side, there are also living benefits such as cash value based products that grow into supplemental retirement plans with the potential of tax-free income. I can vividly recall those kitchen table sales and the many lives that were changed by that stroke of the pen. It was always a good feeling when I left a house at 10:00 at night knowing that we just insured the husband who had a wife and two kids that relied on him to keep the lights on.

On any given day we see carriers releasing charts and graphs showing how competitive their particular products are. We see the IRR calculations, the interest fluctuations, etc. We see complex sales ideas showing financing techniques, white papers and tons of interpretations to justify these techniques. Don’t get me wrong, there are many situations where the esoteric stuff is appropriate and works just fine. But the basic “core” life insurance sale seems to be taking a back seat.

The life insurance marketplace is still one of the most underserved consumer bases out there. If left on their own, consumers can turn to the internet and purchase commoditized versions of life insurance. There are plenty of websites out there attracting these consumers. But the reality is that typically consumers will simply not buy, or not buy enough, life insurance. They do need someone to guide them through the purchase. After all, life insurance is a product that is “sold” and not bought.

The power of what we do is truly amazing. Today, however, I believe that many agents have lost sight of the simplicity of the life Insurance sale. We get smothered by abstract ideas and sales concepts that take away the true meaning of who we are. We are Life Insurance Agents. Be proud of it.

As I am writing this today, there has never been a more important time for us as insurance agents to rise to the occasion, take a step back and soak in the basic fundamentals of selling life insurance. The COVID-19 pandemic has everyone thinking of their mortality. Protecting their families is paramount and that is evidenced by a recent LIMRA report indicating that term life sales for Q1 were up eight percent with many carriers reporting double digit increases. When I started in the business, some of the old time veteran agents in the office would talk to “the new guys” and tell us that we would never understand this business until we delivered our first death claim. You really can’t understand that until you have done it. Those words, as I learned years later, were so true

In my career that spans over 30 years I can honestly say that there has never been a time that life insurance has been as important as it is now. Combine that with the ease of obtaining it through the various non-medical platforms that we are seeing and we truly have an opportunity to go back to those fundamentals that Mr. Lombardi framed so well.

“Gentlemen (and ladies), this is a football…”

Let’s not squander this unique opportunity. Let’s do what we do best.

Diversity Is The Path To More Sales

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When talking to a client about their life insurance needs, have you ever considered an approach that contains a “Complete Life Insurance Portfolio?”  

There are many different types of life insurance products and no one product can accomplish all of the planning needs for a particular client, so it is best to know and understand all of the product offerings that are available.   By understanding all of the different products and combining the best of all worlds, multiple needs are addressed within this “Portfolio of Products.”

Here are some of the different types of products and the main objectives of each:

Whole Life (Limited Pay)—Whole life products are typically used to provide a minimal amount of death benefit and build the most amount of cash for the purpose of withdrawing tax-free income at some point in the future.   The majority of the cash value is reliant on non-guaranteed dividend payments.  This is the most expensive way to purchase life insurance on a per/1,000 basis.  If all of the available premium dollars are used for whole life, you run the risk of being under insured. 

Term Life—as you know, term insurance is used to provide a large amount of death benefit for the lowest amount of premium.  This is a great way of providing the needed amounts of death benefit to cover temporary, short term needs for things like income replacement, mortgage protection, etc.

Guaranteed Universal Life—a great hybrid approach to providing permanent protection with a cost somewhere between term and whole life premiums.   There are typically very little or no cash values associated with these types of products.  The attraction is the guaranteed premium structures and permanency of the death benefit.  These are most widely used for estate planning purposes. 

Current Assumption Universal Life or Indexed Universal Life—these plans also offer a hybrid approach to pricing for death benefits and provide permanent protection.  They are designed to build cash values and give a large degree of premium flexibility compared to whole life, which offers very limited premium flexibility.   Similar to whole life plans, these policies can also be used to build cash value and  provide tax free income.  The values are usually based on either a fixed interest rate (that can be guaranteed) or on a non-guaranteed market index, such as the S&P 500.  

As evidenced above, there are many different products to choose from to address a multitude of planning needs.  In addition to the base products listed, there are also a number of additional features and benefits that can be added to some of these products.   They include, but are not limited to, long term care and chronic illness riders, guaranteed income triggers, longevity protection and uncapped long term care benefits.  These additions can appeal to a wide range of needs that cannot be addressed by some of the individual products listed.  

By using a combination of the different products, features and/or riders, you can make better use of premium dollars and provide an iron clad “Life Insurance Portfolio” that will address a wide range of needs.  This diverse approach will undoubtedly increase your credibility and differentiate you from potential competition.

Driverless Cars And Life Insurance

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Today, so much of what we do has been taken over by technology.  So many industries have been forever changed and, as a result, many jobs have been altered as well.  If we compare jobs and tasks today to what they were when we were just starting out the results are “mind numbing.”

 Let’s think about it.  Books and magazines have been largely replaced by their electronic counterparts.  Taxis by Uber & Lyft.  TV services by the likes of Netflix and Hulu.  Music by iTunes.  Even how we pay for things has changed with Apple Pay, PayPal, etc.  This list goes on and on and everything has changed due to technology.  Some things are just better left unchanged.  For example, I don’t like e-books.  I haven’t drunk that Kool-Aid yet.  To me, there’s nothing like the feel of a book in your hands and the ability to turn a page. 

 Don’t get me wrong. I’m a big fan of technology and believe that our lives are better for it, but when it comes down to it there is no substitute for the human element with some things.   This is especially true when it comes to life insurance.   I don’t like the growing trend of people shopping for their life insurance online.  The majority of people are grossly underinsured and don’t understand the real needs associated with life insurance.  Nothing can replace the years of experience that comes along with a seasoned life insurance professional.

 Life insurance is not an optional thing that you should maybe get around to one day—it’s a necessity.  Just look at all the GoFundMe pages we see in the wake of some tragedies.  If insured at all, the average young family doesn’t have adequate life insurance.   The funds that a surviving spouse needs to make a meaningful impact on their financial lives are often misunderstood.  This is not a knock to the average person, they just don’t know how much life insurance is enough.  

Here are some facts:

  • Only 51 percent of Americans own some type of life insurance (and I’m surprised it’s that high).
  • A large majority have group life insurance that they feel is portable upon leaving their job.
  • A large majority of policies have improper ownership or beneficiary arrangements.
  • Most policies provide grossly low/inadequate face amounts.
  • “Non-working” spouses are typically overlooked and not insured.
  • Most people don’t know the many uses of life insurance including the ability to grow cash value and ultimately remove supplemental tax-free retirement income.
  • Most people don’t know about the myriad of living benefits such as long term care or chronic illness provisions.
  • Most people don’t know the nuances of income replacement and how much of a role life insurance plays in that process.

The list can go on and on.  The point is that when it comes to certain things, there is no substitute for the human touch and plain old fashioned experience. For all of my years in the business, I can speak of countless client encounters where the above holds true.  The world of technology has put so much information at the fingertips of our current/prospective clients, even when it comes to life insurance. The trick is being the one who can bring light onto the stage and make them understand the complete value of life insurance.    

Today, the ultimate buzz in the area of technology is the talk of driverless cars in the very near future.  I wouldn’t invest my money there just yet.  After all, I don’t even trust plain old cruise control.  If you’re a taxi driver however, this notion will not make you feel secure about your future.  As a life insurance professional, do you want to watch that “driverless car” pass you by or do you want to show them the right way a car should be driven?

Are You Ready For the Silver Tsunami?

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Warning: All families living on the fragile coast  between financial security and financial disaster, there is something coming your way—a Silver Tsunami.  This is larger than anything we have seen before.  We advise Baby Boomers to seek shelter under a properly designed insurance portfolio to get you through this coming storm.  This is not a drill!  Please take this seriously and stay tuned for further details. 

A forecast is always helpful.  It helps us prepare for events that can severely impact our lives.   That’s why millions of us look to The Weather Channel when there is a storm coming.  We want to know the facts.  We want to know what is headed our way so that we can not only stay safe but properly prepare so that we can mitigate risk.  So why should this be any different?

As an advisor, you need to seek insights and resources to guide you through “the storm” that we all face every day.  To that end, I feel very strongly that the coming years will bring unprecedented challenges to you and the clients you serve. The Boomer generation is facing a huge crisis that we refer to as “The Silver Tsunami.”  By the year 2030, it is projected that there will be more than 72 million older Americans over the age of 65.  Of those, it is predicted that 70 percent of them will require some type of long term care and over 40 percent will need a nursing home at some point in time.  

The math is staggering.  If nothing is done to prepare for this, it is apparent that many lives will be changed. Not only will the seniors requiring this care be affected financially, but the families around them will be as well.  After all, less than 10 percent of the care provided will be from paid caregivers. So, what does that mean?  Family members will be providing the large majority of care which will have a negative financial impact on them as well.  Considering that almost 50 percent of children of retirees expect to eventually take care of their parents, it is even more impactful.

So, where is the money coming from to pay these expenses?  Sure, it can come from personal assets, but we all know how that story ends; it’s gone before you know it.   Why would anyone want to deplete a lifelong nest egg and sacrifice all they have worked for and built over the years when there is a better, more economic approach to mitigating that risk? 

The answer is that today we have so many ways for you to provide products for your clients that can provide a full circle of benefits to protect against the threat of a long term care event.  They range from stand-alone LTCI policies to blended life alternatives and life insurance with long term care riders.  

The stand-alone marketplace has just seen even more contraction with additional carriers exiting the space.  This leaves only a relatively few players left.  The long term sustainability of these types of policies does not look promising, as the costs are not guaranteed and it is difficult to sell to a client when the premium structures keep going up.  This has led the way for long term care planning alternative products that have been offering viable options to this marketplace. 

The blended life designs are attractive havens for lump-sums of money that can be heavily leveraged to provide large tax-free pools of long term care benefits.   There are several carriers offering these types of products on both a universal life and whole life chassis.  Further, depending on the carrier, product and state of issue, there are a host of options available such as reimbursement or indemnity style benefits.   There are also options available on a survivorship life platform with blended age ratings that can be used for spouses, same-sex couples and parent/child variations.  There are even provisions for uncapped lifetime benefit pools.

The next plan design, and probably the most popular, is the use of guaranteed universal life with long term care riders.  Unlike stand-alone LTCI policies, the rates for these plans are guaranteed and do not have a “use it or lose it” approach as they relate to potential claims.  If you never go on claim for the long term care benefit, there will always be a death benefit payable to your named beneficiaries. These are also available as either reimbursement or indemnity style and may also be available with certain carriers in a survivorship GUL form.   

Keep in mind that not every client will qualify for the long term care/life products outlined above.  However, it’s important to note that it is possible to offer sub-standard rating classes for some of the above designs.   In those cases, where clients would not qualify for the long term care options, there are also chronic illness variations available with some carriers that can provide similar types of benefits. 

I believe very strongly that the products outlined above represent the future of long term care protection.  By utilizing these products, there are a number of creative approaches that can be employed to help you guide your clients and their families through the risk management process of potential long term care events.   Every client has a different story and we can help provide solutions for a large number of them.  Some of the techniques may include the repositioning of assets, such as Social Security benefits and “lazy cash positions.”  Without getting too complicated however, paying smaller annual premiums to provide a guaranteed pool of money to guard against these threats can be the best approach.

As the forecast mentioned earlier, there is a Silver Tsunami approaching.  Like any disaster, being forewarned gives us an opportunity to prepare.  You will be able to get your clients ready for the coming storm and, with the resources now available, properly protect them from the risks they can likely face. 

The Blizzard Of 2016 – What Did We Learn As It Relates To Life Insurance? I know what I learned – make sure your snow blower works at the beginning of the season!

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As many of us do, we take things for granted.  With so much going on and the mild winter we had to date, I wasn’t thinking about snow.  Moreover, I wasn’t thinking about my snowblower.  So, as our good friend Murphy would have it, his law applied to my snowblower not working when I needed it most. Basically, it was too late to do anything about it so the good old-fashioned shovels were put hard to work (very hard for that matter). I gained pains in my back and, more importantly, the awareness that a lack of planning put me in that position in the first place. So looking for a Snow blower for sale was first on my list as I cursed the snow.

This brings me to my point. We, as insurance professionals, have a responsibility to help our clients get through the “Blizzards of Life”. Are they prepared?  Do they understand the importance of the products we sometimes seem to shove down their throats? Do they take it for granted?

Our clients have lots of snow to clear.  They have responsibilities,  incomes to replace, college educations to fund and futures to secure.  There are so many new and innovative products available today that can help you properly plan with your clients.   Here are some quick reminders of approaches to selling life insurance products.

Sell to Need and Not Cost
Always determine the correct amount of life insurance needed.  If the cost becomes too high for the client, find other ways to provide the needed amount.  You can always ladder different term durations to bring the cost down or simply build a “portfolio of products” to provide the needed amount of coverage. 

Don’t Forget Policy Audits
Policy Audits are a great way of helping clients either save money or enhance their product portfolio.  There have been significant price reductions and product enhancements that can expand the types of benefits provided under their current plans.  People review their auto or homeowners’ policies all the time as well as refinance mortgages for a better deal.  Life insurance should be no different.  Besides, most enforce policies are not adequately protecting their needs and often have improper ownership and beneficiary arrangements that were originally put in place by the writing agent.  This service proves to be invaluable and solidifies your credibility. 

Supplemental Retirement Planning
With limits on qualified plan contributions and the uncertainty of Social Security, it is important to have multiple vehicles for retirement savings.  Let’s not forget that cash value life insurance policies still provide tax deferral and ultimate tax-free withdrawal capabilities.  And if an insured dies prematurely, a death benefit is paid to their beneficiaries.  Believe it or not, this is one of the most overlooked features of life insurance.  

Long Term Care Planning
Life Insurance policies are now being sold with long term care riders that allow for an acceleration of benefits should the insured have a long term care health event.  These products create a guaranteed pool of money that acts as protection against assets that would potentially be lost otherwise.  With the long term care crisis looming over our aging  Boomer generation, this has become one of the most integral planning benefits that we can provide.  Individual LTCI policies have non-guaranteed rate structures and are “use it or lose it” in terms of claims exposure.   The life insurance/long term care hybrid products usually have guaranteed premium structures and ultimate death benefits payable, making them self-completing and very attractive.  

So the lesson of The Blizzard of 2016 becomes a metaphor for insurance planning. Don’t get caught with that snowblower that doesn’t work when the storm has already hit.  It’s just too late at that point to do anything.  The plows come and the snow will eventually melt away, but families will be better off if they plan properly for those “Blizzards of Life”

We All Just Got Busier Thanks To The Supreme Court

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Knock Knock!

Who’s There?

One More.

One More What?

One more distraction for the

2016 presidential election.

It’s unfortunate, but that’s what this is going to become. On June 26 the Supreme Court’s landmark ruling recognizing same sex marriage nationwide is going to become what will surely be interesting campaign fodder. From a personal standpoint, I will do my usual and stand neutral with regard to my political views on this and other hotly debated subjects. I learned a long time ago that politics and religion are best left off the table.

So here it is: The United States became the 23rd nation to recognize same sex marriages. Here is a list of those countries, in chronological order:

Netherlands, 2001; Belgium, 2003; Canada and Spain, 2005; South Africa, 2006; Norway and Sweden, 2009; Portugal, Argentina, and Iceland, 2010; Denmark, 2012; Brazil, England, France, New Zealand and Uruguay, 2013; Luxembourg and Scotland, 2014; and Finland, Slovenia, Republic of Ireland, Mexico and the United States, 2015.

For us, as financial advisors, what does this all mean? If we place politics aside, where are the business opportunities here? This is certainly not a new opportunity but one that is virtually untapped in terms of financial planning matters. With this recent ruling, the subject is more timely than ever. 

At the beginning of June I attended the NAIFA New Jersey Summit, and one of the speakers was an attorney whose entire talk was about how to facilitate legal and insurance planning within the same sex community. His talk was state focused, but now the rules will apply in every state in the union. Funny how a few weeks make such a difference in our industry. Sales opportunities are always presenting themselves to us, and this is certainly no different.

So where are the opportunities? How do we hit the ground running and start addressing the unique needs of this new marketplace? Same sex couples will now enjoy the less complicated approach to planning. Prior to this decision they had to endure many extra steps in the planning process and still were not able to fully execute the same level of planning solutions afforded to “traditional” married couples. Here’s a snapshot of the significant areas of change:

 • Social Security Benefits­: By the spousal recognition, it will be easier to access Social Security benefits that had previously not been available to same sex couples.

Planning Opportunity: Clients always want to understand their Social Security benefits. This will be even more confusing now, and it transitions into the retirement income conversation. Surely there will be a need to discuss supplemental planning.

 • Health Insurance: Same sex married couples will now be able to access spousal benefits for major medical and other employee benefits.

Planning Opportunity: This will free up cash flow for clients who were not previously eligible for group pricing for family coverages. As cash is freed up, it opens the door to a number of ancillary products that you can provide.

 • Income Tax Planning Options: Same sex married couples will now be able to choose their filing status. In the past, filing separate returns was the only option. But now, if it makes sense, there will be a married, filing jointly option. Keep in mind that if both spouses are high earners, they may be subject to the marriage penalty that may account for a higher tax bracket. But ultimately there are now choices, and the pros will outweigh the cons.

Planning Opportunity: Once again there should be an ease on cash flow due to the filing options, and this will free up discretionary cash for ancillary sales. Another point to consider is that adoption is very common, and there may be tax credits available for couples that take this road, whereby freeing up additional cash.

 • Estate Planning: By normalizing marriage laws across all 50 states, the most significant change will be the inclusion of the unlimited marital deduction. Now, after the death of one spouse, all of their assets will pass tax-free to the surviving spouse. This was the largest single financial win for this ruling. Prior to the ruling, assets could not pass tax-free to the surviving partner. Essentially, estate taxes were due, and all affairs would have to be settled in short order. It will be much easier to help a same sex couple plan with the use of second-to-die contracts and smoothly facilitate wealth transfer without the need to jump through hoops via elaborate, overly complicated and expensive planning methods.

Planning Opportunity: Approach estate attorneys and CPAs to assist them with the implementation of life insurance planning. By the way, don’t assume that these professionals are aware that same sex second-to-die policies are available, and in most cases one spouse can even be uninsurable.

 • State Specific Estate Planning: For states like New Jersey, New York and Connecticut that have their own estate tax, the current ruling is more impactful. The unlimited marital deduction is now going to extend to the individual state of residence. Basically, there will be no state estate or inheritance tax due upon the death of a married resident for the surviving spouse. New Jersey, for example, has a threshold of only $675,000. Anything above that would trigger the tax for a “non-recognized” partner for amounts above the $675,000 threshold.

Planning Opportunity: Same as estate planning previously mentioned, but the federal exemption limit is $5,340,000, which would apply to higher net worth clients. The individual state estate taxes, like New Jersey, have a much lower threshold, which will apply to a wider audience.

As you can see, there are a number of planning alternatives that have been created by the recent Supreme Court ruling. In addition to what was mentioned above, there are a number of business planning applications that can be brought to the forefront. I’m sure that in the coming months, as this unfolds, there will be confusion and questions as to how this will work in the long run. But one thing is for certain, we were all made busier by this recent decision. There are many attorneys and CPAs that have clients who are affected by this. There are also a number of local LGBT organizations that will need your services. Becoming well versed in this topic will surely open up doors leading to new revenue sources and marketing ­opportunities.

How To Get To The Business Owner

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Wouldn’t it be great to have the key to  the door you’re trying to open?

For years agents have said that they are in the “business market,” but what does that really mean? Are they taking the right approach? Are they truly in that marketplace?

When approaching a business owner, what are you asking? The same questions they have been approached with 100 times before? “Do you have a plan in place if something were to happen to you or one of your partners?” “Do you have a 401(k) ?” “What are you doing for retirement?” “Do you have a succession plan?”

These questions will typically go in one ear and out the other so quickly. Why? Because business owners know it (you) will cost them money, which is not any business owner’s intent. A different approach and conversation starter should be: “When is the last time you had a proper business valuation?” Business valuations  are the cornerstone of beginning the process toward uncovering the answers to the above and many other questions in a way that is not unwelcome. You are coming in under a consultative role, and during that process you will uncover areas of weakness where business owners are exposed to severe tax consequences. Essentially, you are saving them money in the long run. The true sales opportunities will organically come to the surface.

The reality is that most times businesses don’t have a valuation in place, or they simply have a number in mind that has been derived with no real methodology behind it. Without a proper valuation, business owners open themselves—or should we say their heirs—to a host of planning nightmares.

An undervalued business interest can result in huge tax liabilities and/or business succession and continuation issues. In some cases, through strategic alliances, it is possible to provide an initial business valuation without cost to the business owner. It is important to align yourself with firms that can provide access to these platforms. This will significantly increase your value proposition to your current and prospective client base.

By offering this initial no-fee service, it is hard for a qualified prospect to say no. Once this first level of service is provided, a number is generated that is either:

 • Exactly what the client thought their business was worth;

 • Less than what they thought; or

 • Higher than they thought.

Regardless of the outcome, there is a planning opportunity that awaits you. You now have a road map that will lead you to the planning stages and implementation of products to solve a number of planning issues that will likely be uncovered during the process. Plus, from a financial underwriting standpoint, you’ll know exactly what the client will qualify for before you even get to the application stage.

Some of the opportunities that can be uncovered:

 • Buy/Sell Sales. Often there are partners involved in the business setting. Once determined, the conversation ensues about the implementation or review of a current formal agreement.

 • Key Employee Retention. During the process, key employees are identified, as is the effect that the loss of each can potentially have on the business. Strategies can be implemented to protect the business in a number of ways, through death benefit if that person prematurely passes and/or the design of “golden handcuff” type benefits that can be used for retention of that employee. Perhaps a deferred compensation program or an executive bonus Section 162.

 • Succession Planning. You can uncover the need for succession planning to assure the continuation of that business for the next generation. This is a very important element that comes up often during the process.

 • Estate Equalization. Perhaps there is a family business in which only some of the children are involved. The father of two siblings wanted to make sure that both of the children would inherit equal shares in the family business. The problem was that the son had been working with his father over the last five years and had significantly grown the business, while the daughter wanted nothing to do with it. As you can imagine, this could cause a lot of bad blood in the family. In our example, estate equalization sales allow for a life insurance policy to be purchased on the life of the father so that his daughter would receive what amounted to her equal share of the business without causing friction between the two siblings.

 • Personal Financial/Estate Planning. Often the largest asset that a business owner has is the business. Now that you know what it’s worth you can transition toward the personal needs of the individual, including income continuation, estate planning, retirement planning, etc.

This next section will discuss some techniques on how to best utilize living benefits to assist your business clients. Living benefits such as long term care and chronic illness riders are fairly new to the industry. These riders offer unique solutions in this marketplace. There are various ways they can be applied.

Living Benefits in Business Planning

As indicated previously, buy/sell planning, or lack thereof, can be an area that may be exposed as a weakness. Many advisors focus on funding buy/sell agreements with life insurance and stop there. But what if a business partner is incapacitated due to a serious illness or injury? Believe it or not, this can actually have a greater impact on a business than a premature death. Statistically this is more likely to occur, and it is why most disability income policies are so expensive compared to the premiums on those same partners who buy large amounts of term life insurance to fund a buy/sell agreement.

One of the most interesting product innovations has made itself an attractive business planning tool when dealing in this area. Permanent life insurance plans can now be purchased with long term care riders (LTCRs) or chronic illness riders (CIRs). By utilizing these products the life insurance that is often sold to fund a buy/sell agreement can have an LTCR or CIR attached. If one of the covered partners has a serious health event due to illness or injury, the business can accelerate the death benefits via the provisions of these types of riders. The funds can be utilized in a number of ways, including providing lost revenue to the business while the partner is incapacitated or, in extreme examples, as a “disability buy-out.”

The major point is that these products can make it easy to sustain a business through a major event other than death. In order to receive benefits under these types of plans, the insured party must meet certain criteria. In most cases the trigger is either the inability of that person to perform two of six activities of daily living (ADLs) or the diagnosis of a cognitive impairment. There are typically waiting periods associated with these provisions, but keep in mind that we are protecting against catastrophic loss. Shorter term health events would simply not have as great an impact on a business.

From a sales perspective, keep in mind that LTCRs and CIRs are typically available only on permanent products, not term insurance that is more widely used to fun buy/sell agreements. As the clients understand the full circle of benefits provided, this will have a significant impact on compensation as you migrate to more permanent product sales.

The next type of living benefit to focus on is the use of the cash value within permanent life insurance plans and how they can be utilized for supplemental retirement planning. For years they have provided a unique niche to advisors who understand the market. The power of what these products provide is probably more relevant today than it ever has been. It is often overlooked and/or misunderstood. So let’s take a look at the fundamental benefits provided by these plans.

Supplemental Retirement Planning

For years one of the most attractive benefits to a business owner has been the ability to put as much money away for retirement as possible. Unfortunately for most, they are limited in terms of qualified plan contributions. Cash value life insurance is still one of the best ways to supplement their retirement nest eggs.

Regardless of what plan is used—whole life, current assumption universal life or indexed universal life—they all have something in common: tax deferral and ultimate tax-free withdrawals.

Typically there is no limit on premium contributions other than a budget that is affordable to the client. It is up to you as the advisor to maximize the benefits they will be getting by paying close attention to things like modified endowment contract (MEC) limits so the client can take full advantage of a properly structured plan. Permanent life insurance continues to be one of the best time-tested vehicles for a client’s money. Here’s an example of how a typical permanent plan can work to one’s advantage. For this example, we are showing a whole life product and what it may look like:

As you can see, a $20,000 premium payment is being made every year. An initial death benefit of $838,210 is provided. The guaranteed cash value by year 10 is equal to premiums paid and not only keeps pace as the years go by but also exceeds the sum of the premiums.

Dividends are being earned all the while, and the returns are significant enough when compared to an outside investment assuming a net growth of 4 percent each and every year. All things being equal, we show a tax-free income starting at age 65 of $41,244 payable to age 100, or $56,239 payable to age 85.

Most important, the death benefit that started at $838,210 has grown to more than $1.8 million by age 65. If this client died anytime along the way, the corresponding death benefit would be paid to his beneficiary—that’s the “fast-forward” button that people often overlook. Unlike any other retirement vehicle, the money will be there even if the client is not.

That’s a pretty powerful and compelling approach, but unfortunately it is not widely used by most advisors. Surprisingly, when the question “Why don’t you sell this type of product?” was asked, the most common answer was, “I wasn’t aware it could do all that!”

As you have seen, there are many ways a business valuation can uncover sales opportunities. We have taken a glimpse at some of them. The real question is, “How are you approaching business owners, and are you truly in the business market?”

Asking the typical questions that have been asked over and over again is just not as effective as asking “When was the last time you had a proper business valuation?” If you start off with this approach, not only will you open doors but you will also have the key.