Our client had life insurance with two major, top-rated mutual carriers that he thought would be “paid up in ten years”. It wasn’t. We convinced both carriers to honor the original agent’s well documented “10-pay”commitment, saving the client a minimum of $422,000, more likely substantially more. Additionally, every premium dollar saved also saves 47 cents of gift taxes.
A new, extremely private client would not authorize the release of any financial information to justify the need for a $20 million policy. In addition, his current medical history would have typically precluded him from getting any amount of coverage for two years. We delivered a $20 million policy at preferred rates with no further medical work-up or financials.
We uncovered a “lifetime guarantee” survivorship product priced 40% - 50% below market. In underwriting this product for one couple, the carrier declared one spouse “uninsurable” due to her overall medical history.The very influential intermediary (brokerage general agent) we worked with could not budge that decision. Ultimately, our in-house Underwriting Director attained a preferred offer on both spouses from the carrier’s chief underwriter.
A company owned $7 million of existing “key man” term insurance: Despite current health issues, we reduced the company’s cost by at least $600,000 over the next 10 years, and dramatically improved contract language. The old policy rates were subject to increase, and the coverage would end in 10 more years. The new policy rates are lower, guaranteed, and remain level for the next 15 years. The contract and pricing were so attractive, the company purchased an additional $33 million.
A trust owned two under-performing survivorship policies. The grantor, frustrated that premiums didn’t “vanish” when they were supposed to, ceased gifts on one policy. Ensuing premiums were paid by loan, jeopardizing that policy’s longevity. We were able to repay the loan using funds from the other policy, re-negotiate underwriting (despite significant health issues), and deliver two new policies with lower guaranteed premiums, guaranteed death benefits, no future loans, and no income tax. The corporate trustee, grantors, and referring attorney were extremely pleased.
Our age 72 client was diagnosed with bladder cancer after the policy was issued, but before the delivery documents were signed. We were able to negotiate with the underwriter and deliver the policy without additional medical records or alterations to the policy design or cost.
A whole life policy issued in 1990 was classified as a Modified Endowment Contract* (MEC). The carrier agreed to reverse the MEC status and process a face amount reduction. These two changes enabled the policy owner to recover $1,450,000 of otherwise taxable dollars on a tax-free basis, for the purpose of “unwinding” a split dollar** agreement. The carrier then transferred the remaining cash value to a “guaranteed forever” policy requiring no further premiums.
Life insurance with a top-rated mutual carrier was sold as a single premium “investment contract”. It wasn’t. FLAH & COMPANY illustrated to the carrier why they must refund the entire premium (less withdrawals) on a six year-old, traditional whole life policy, with 10% interest, compounded. They did.
Several tax advisors sought our guidance in illuminating key questions and issues surrounding “free life insurance” and “sell your policy” programs being promoted to their clients. Prior to making a “go/no go” decision, we ensured that clients had a clear understanding of issues generally kept behind the curtain, and often times enhanced the package.
*The case studies are based on actual client situations but are meant for informational purposes only. The case studies are in no way intended to be used as a primary basis for insurance or investment decisions. Similar results are not guaranteed and will vary based the individual client situations. This example does not represent any specific product, nor does it reflect sales charges or other expenses that may be required. Clients should consult with their own financial, tax, legal, and accounting advisors before implementing any insurance or investment plan. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security or investment product.Payments of guaranteed principal and income, as well as living and death benefit guarantees are contingent upon the claims-paying ability of the issuing company. Optional living and death benefits are available for an additional fee and may not be available in all states.
**Split-Dollar Insurance is not an insurance policy; it is a method of paying for insurance coverage. A split-dollar plan is an arrangement between two parties that involves "splitting" the premium payments, cash values, ownership of the policy, and death benefits. Split dollar arrangements are subject to IRS Notice 2002-8 and Proposed Regulations that apply for purposes of federal income, employment and gift taxes.
