Thursday, June 26 2014
Top ten reasons CPAs recommend IUL over traditional retirement plans.
1. There is no annual limit to contributions.
2. You can access the money prior to age 59½ with no penalty.
3. Unlike traditional retirement plans, funds can be taken out tax-free any time.
4. There will be no loss of capital due to market downturns, ever.
5. There are no mandatory distributions.
6. Money is protected from future increases in tax rates.
7. Cash value increases as the market grows.
8. Gains in value are locked in annually, forever.
9. Account value benefits from triple compounding — of principal, interest, and taxes that are eliminated.
10. Heirs pay no income tax on policy proceeds.
IUL is an excellent alternative or addition to a traditional retirement plan. Even the CPAs agree.
Contact us to learn if this is a viable option to protect your money.
*We also offer other strategies to guarantee your monies, and will provide an individual analysis at your request.
The Skyline Group
Thursday, June 26 2014
Is There Really a Perfect Life Insurance Contract?
Published May 02, 2012
No. There isn’t one contract that can do everything. There are trade-offs with each.
But an emerging and fast-growing contract design--the indexed universal life (IUL) policy--may come very close to being the ideal contract for most consumers in today’s interest and overall market environment.
The IUL has been around for about seventeen years now, starting out with only a few companies offering it. But now this marketplace is becoming very crowded with many more companies seeing the opportunity here. It is more important than ever that you find a trusted advisor who is familiar with all the various contracts offered by all the top producers. These contracts vary in many ways, and it is important to make sure the contract you are considering, with the company you have chosen, is the one that best fits with your intended purpose or purposes for the contract. This means choosing an independent agent who represents several different companies, not an agent that represents one company with several different policies.
What is indexed universal life? It is a traditional universal life insurance policy that credits interest to the customer’s contract based on the movement (if any) of an index (such as the S&P 500 Index) over a given period of time. The contract is not registered, which means no prospectus or equity licensing is required, and the customer never buys the index directly. The insurance company uses most of the premium to buy triple A rated bonds to cover the policy guarantees and a small part of the premium to buy call options on the index chosen.
This type of life insurance is certainly different than traditional UL, in which interest credited is based on performance of the insurance company’s general account bond portfolio.
It’s easy to see why, in today’s low-interest-rate environment, IUL has appeal for many customers. It allows the possibility of providing a greater upside potential to the customer than offered by relying on regular fixed interest rates.
Why not just sell variable life to provide the customer upside potential? Market research has revealed that most customers today really do want some contract guarantees in their life insurance policy---and an IUL contract does contain guarantees. Admittedly, these guarantees are at lower levels than those of traditional UL policies, but given that the IUL contracts offer greater upside potential than traditional UL, this is not a deterrent to the purchase of these policies.
Who are the perfect customers for the IUL? These are people who:
Proper selling of this contract not only requires the advisor to have an understanding of the terms such as cap, participation rate and floor (much like the selling of indexed annuities). But the advisor also needs to know the proper positioning of this product, so the customer has realistic expectations.
IUL contracts should be compared to straight universal life contracts. The goal for the customer (as with the index annuity sale) is hopefully to “beat” fixed interest rates by 2-4% long-term.
This contract should “not” be compared to a variable life insurance contract. If the customer is enamored with unlimited upside potential, then variable life is the appropriate choice--as long as the customer understands the lack of guarantees in a variable life. For example, a big market downturn could cause not only a loss of cash, but the policy could lapse and the life insurance would be lost as well).
IUL can be the perfect alternative for customers really wanting the upside potential with downside protection. These products were at one time riding on the success of the indexed annuities, which have enjoyed a tremendous sales run over the past 20 years during the generally low interest rate environment. Now the IUL has a great success record of its own to ride on. Certainly, the IUL guarantees aren’t as strong as those in indexed annuities. This is because of the IUL’s insurance charges and other contract fees deducted from the account values, but the tradeoff is the tax advantages of the IUL cash account—a result of its status as life insurance. Also, IUL offers much stronger security for customers than variable life. And, for the customer who really wants to maximize the amount payable to heirs, the IUL is better. Consider this: How many annuities ever get annuitized? Very few. There are probably some index annuity sales that should be IUL.
Up until recent times, the life insurance industry has really had four mainstream insurance contracts: term life, whole life, universal life and variable life. For the reasons mentioned above, indexed universal life has become another mainstream contract, and the fastest-growing segment of the life insurance market.
Thursday, June 26 2014
Can a Life Insurance Policy or Annuity Protect Your Wealth From a Lawsuit?
Published January 02, 2013
Did you know the lawsuit industry is $233 billion dollars strong in the USA?
The number of lawsuits is rising, too. When economic times get tough, some people see a civil suit as an easy way to get rich. Lawsuits always target those who have money and not just big corporations, either.
Small businesses, successful entrepreneurs, physicians and wealthy individuals all fall into the crosshairs of litigation lawyers. As every law student learns at some point: “commercial success spawns litigation.” Everyone wants their money.
Fortunately, we’ve got some great solutions for you (and one solution offers a way to turbo-charge your investment profits). So whether you are just beginning your journey to personal financial freedom or you’ve already secured the fortune of your dreams this article can be beneficial for you. A legitimate question to ask is: how do you safeguard your hard earned wealth?
Many times I’m asked if a trust or trust fund can protect my wealth. This is a good question ... and the answer is more complicated than a simple “yes” or “no.” Here’s why:
It comes down to how the trust is set up, basically whether the trust is revocable or irrevocable. Whoa. Those are big lawyer-speak words, so let’s simplify it.
Revocable = you can change the terms of the trust (or dissolve it) whenever you like. It is completely flexible.
Irrevocable = you cannot change the terms or dissolve it (at least not until the terms or purposes of the trust have been completed).
Most trust funds that people set up are called “Revocable Living Trusts.” As already mentioned, the “Revocable” part means that the terms of the trust can be changed. The “Living” part means that the trust is in effect while the trust creator is still alive. A Revocable Living Trust has many nice features. It’s relatively easy to set up, and it is becoming a popular replacement for a will in the United States. There is one little problem: the revocable living trust offers no asset protection.
The courts are very clear about what money is protected in a lawsuit and what is not. Revocable trusts have no protection whatsoever. If you are sued, any money you have in a revocable trust is vulnerable.
So if you’re looking for asset protection (or any potential tax sheltering), a revocable trust won’t cut it. For protection against lawsuits, you need an irrevocable trust. But the protection you get with an irrevocable trust comes with significant trade-offs and you must follow some stringent rules. Below are two iron-clad rules of an irrevocable trust.
The first is if you are sued, lawyers will try to attack the legality of your trust. Your only line of defense is to make sure the trust is set up as clearly irrevocable.
The second iron-clad rule is that you must set up the irrevocable trust anyone sues you (or even before someone threatens to sue you). If you try to set one up after a lawsuit is initiated, no (competent) lawyer will touch it. That’s because lawyers can then be sued too under state "fraudulent conveyance laws." If you attempt to hide or move assets to avoid creditors it’s a fraudulent conveyance. The courts will rule against the trust in a lawsuit.
Setting up an irrevocable trust for asset protection isn’t cheap. Domestic asset-protection trusts cost around $3,000 to $10,000 in attorney's fees, plus yearly asset management fees of roughly 1 percent.
A much lower cost alternative to a trust, depending upon your needs, is an Indexed Universal Life (IUL) that might serve as a viable replacement for an asset-protection trust. The “IUL” is what I like to call a Self-Directed Banking System. It’s a foundational strategy in a wealth protection and income plan.
An “IUL” and an irrevocable trust are not identical, but an “IUL” is much easier to set up. No lawyers are needed; it has a lower startup cost; and includes a host of additional benefits. For example, an IUL can provide:
Basically, you protect your money from a lawsuit without giving up control of the money.
There is also another asset protection product, provided by insurance companies, called the Fixed Indexed Annuity (FIA). Just like the IUL, the FIA (in most cases) provides creditor and lawsuit protection and is the perfect haven for your qualified/retirement savings. The FIA offers indexed market growth and also guarantees no loss of principal or gains along with it protection.
If you fall into the categories described in the beginning of the article, the IUL and FIA could be perfect for you.