The need for LTC/HHC Insurance has never been greater. I am reminded on a daily basis from real life stories of children stricken with the cost of taking care of their ageing parents. My advice for all producers is to complete a fact finder for your clients needs. As baby boomers retire at a rate of 10,000 per day in America, a large portion of them will require some assistance. The cost is extreme. Usually ranging from $3500.00 per month to $8,000.00 per month. (per person) Many insurance companies offer coverage. It is prudent for your client to obtain coverage at an earlier age, therefore the premiums will be affordable as they age. My advice is to promote this coverage for anyone over the age of 50. The coverage is available to your prospects into their 80's. So it is never to late to discuss this important coverage. The products are strictly underwritten as the carriers are taking on a huge risk. As a licensed professional you have a responsibility to inform your clients of what products will protect there life savings. More importantly you should inform them on how they may keep there independence & dignity in there golden years.
I am proud of the quality business that my family of Global Insurance Group agents have provided to our clients. The LTC/HHC business will be utilized in the future by a large portion of our clients.
Friday, August 6, 2010
Wednesday, February 3, 2010
Converting an existing traditional IRA to a Roth IRA. New tax laws for 2010.
A Roth conversion is the conversion of a traditional IRA or SEP contract to a Roth IRA. A conversion results in a taxable event. This conversion allows the taxpayer to gain the benefits of a Roth IRA. The ultimate decision of whether or not to convert to a Roth IRA will require thorough quantitative analysis, and the consultation with the client’s tax advisor.
Some considerations:
What is new for 2010?
On Jan 1st 2010, every taxpayer will be allowed to convert their traditional IRA to a Roth IRA. The IRS is allowing taxpayers who convert in 2010 & only 2010 the option to defer paying the tax in 2010 and spread the conversion income to half in 2011 and half in 2012.
Obviously converting a traditional IRA to a Roth IRA is a taxable event and could result in additional impacts to your clients personal tax situation, including the taxation of current social security benefit payments. Your clients should be prepared to pay all of the taxes that the conversion will create.
Previously, there were limitations on converting. There was a $100,000 modified adjusted gross income (MAGI)
The converted amount may be subject to the 10% federal early withdrawal penalty if withdrawn with five years.
Income from the conversion may have a short-term ripple effect on other items, such as taxation of social security and Medicare cost.
Your client should consult with their tax advisor prior to the conversion
Some considerations:
What is new for 2010?
On Jan 1st 2010, every taxpayer will be allowed to convert their traditional IRA to a Roth IRA. The IRS is allowing taxpayers who convert in 2010 & only 2010 the option to defer paying the tax in 2010 and spread the conversion income to half in 2011 and half in 2012.
Obviously converting a traditional IRA to a Roth IRA is a taxable event and could result in additional impacts to your clients personal tax situation, including the taxation of current social security benefit payments. Your clients should be prepared to pay all of the taxes that the conversion will create.
Previously, there were limitations on converting. There was a $100,000 modified adjusted gross income (MAGI)
The converted amount may be subject to the 10% federal early withdrawal penalty if withdrawn with five years.
Income from the conversion may have a short-term ripple effect on other items, such as taxation of social security and Medicare cost.
Your client should consult with their tax advisor prior to the conversion
Wednesday, October 7, 2009
Life Insurance w/LTC & HHC Benefits!
Life Insurance riders that offer benefits to our clientele for Long Term Care & Home Health Care is the latest cutting edge guarantee in our industry. Allianz Life has products designed to offer the insured the ability to tap into their death benefit, prior to death, receive tax free income, to pay for LTC /HHC expenses. As a producer, you have to be well schooled on this new concept in LTC and Life Insurance Planning.
Most long-term care insurance is purchased as a stand-alone policy, but some companies that sell life insurance now offer riders that provide benefits if your client were to need long-term care. The rider lets your client take "an advance" on their death benefit if long-term care or Home Health Care becomes necessary. The rider makes it possible to accelerate payment of the death benefit in this situation. The death benefit for your client's life insurance policy is reduced by the amount used for LTC expenses, along with a small service charge. If your clients need long-term care for a lengthy period of time, the death benefit will eventually be depleted.
These riders differ from company to company. With some, the policyholder collects a percentage of the death benefit each month. For instance if you sell a $500,000 death benefit and the percentage is 1%. The monthly payout for LTC/HHC is $5,000 per month. The 5K would be deducted dollar for dollar of of the death benefit . With others, long-term care expenses are reimbursed as they are incurred , up to the limit set by the rider.
All Global Insurance Agents should get familar with this concept.
Most long-term care insurance is purchased as a stand-alone policy, but some companies that sell life insurance now offer riders that provide benefits if your client were to need long-term care. The rider lets your client take "an advance" on their death benefit if long-term care or Home Health Care becomes necessary. The rider makes it possible to accelerate payment of the death benefit in this situation. The death benefit for your client's life insurance policy is reduced by the amount used for LTC expenses, along with a small service charge. If your clients need long-term care for a lengthy period of time, the death benefit will eventually be depleted.
These riders differ from company to company. With some, the policyholder collects a percentage of the death benefit each month. For instance if you sell a $500,000 death benefit and the percentage is 1%. The monthly payout for LTC/HHC is $5,000 per month. The 5K would be deducted dollar for dollar of of the death benefit . With others, long-term care expenses are reimbursed as they are incurred , up to the limit set by the rider.
All Global Insurance Agents should get familar with this concept.
Tuesday, August 4, 2009
Please Join NAFA
If you are a licensed insurance professional, it is your obligation to join NAFA now. This organization is having great success in assisting all agents on a national level. Global is proud to be an associate partner.
http://www.nafa.us/
Please join NAFA today. All agents who respond to this blog will be given 10 leads for life insurance prospects in your area.
Good selling,
Tom
http://www.nafa.us/
Please join NAFA today. All agents who respond to this blog will be given 10 leads for life insurance prospects in your area.
Good selling,
Tom
Sunday, July 19, 2009
Great Website for LTC Information
To all LTC producers. I like this site, it has all of the pertinent information related to LTC Insurance. The need for LTC Insurance is greater then ever. Ask all of your clientele whom are 45 & older to take a look at this site.
http://www.longtermcare.gov/LTC/Main_Site/Paying_LTC/Costs_Of_Care/Costs_Of_Care.aspx
Tom
http://www.longtermcare.gov/LTC/Main_Site/Paying_LTC/Costs_Of_Care/Costs_Of_Care.aspx
Tom
Thursday, May 14, 2009
MODIFIED ENDOWMENT CONTRACT DEFINITION:
As I promised here is a detailed explanation of a M.E.C on a life Insurance Contract.
Modified Endowment Contract Explanation.
The Technical and Miscellaneous Revenue Act (TAMRA) is a law that was established to determine the tax consequences of income received from
a life insurance policy during the lifetime of the insured. TAMRA makes a distinction, based upon the amount of premium paid, between a policy
purchased primarily for a death benefit from one that was purchased primarily as an investment. TAMRA establishes an annual premium limit for 7
years, called the 7-pay test. A policy that is funded in excess of the 7-pay premium limits is considered to be a "Modified Endowment Contract"
(MEC).
Events such as timing of premium payments and policy changes play a role. Your clients should be aware that the insurance
proceeds payable to the beneficiary upon death of the insured are income-tax free and policy cash values will grow on an income-tax deferred
basis. However:
1. Any cash distributions, withdrawals, assignments or loans made at any time during the life of the policy (other than death) will be included in
the taxable income to the extent of the taxable gain at the time of the transaction. Taxable gain is the excess of the policy value over the sum of
the premiums paid less withdrawals (cost basis).
2. Such distributions will also be subject to a 10% penalty tax on amounts included as income unless you have attained age 591/2, become
disabled, or you arrange for a distribution in substantially equal payments over your life expectancy. If the owner is a non-natural entity, ( e.g.
corporation or trust, etc), such proceeds are always subject to the 10% penalty.
As I promised here is a detailed explanation of a M.E.C on a life Insurance Contract.
Modified Endowment Contract Explanation.
The Technical and Miscellaneous Revenue Act (TAMRA) is a law that was established to determine the tax consequences of income received from
a life insurance policy during the lifetime of the insured. TAMRA makes a distinction, based upon the amount of premium paid, between a policy
purchased primarily for a death benefit from one that was purchased primarily as an investment. TAMRA establishes an annual premium limit for 7
years, called the 7-pay test. A policy that is funded in excess of the 7-pay premium limits is considered to be a "Modified Endowment Contract"
(MEC).
Events such as timing of premium payments and policy changes play a role. Your clients should be aware that the insurance
proceeds payable to the beneficiary upon death of the insured are income-tax free and policy cash values will grow on an income-tax deferred
basis. However:
1. Any cash distributions, withdrawals, assignments or loans made at any time during the life of the policy (other than death) will be included in
the taxable income to the extent of the taxable gain at the time of the transaction. Taxable gain is the excess of the policy value over the sum of
the premiums paid less withdrawals (cost basis).
2. Such distributions will also be subject to a 10% penalty tax on amounts included as income unless you have attained age 591/2, become
disabled, or you arrange for a distribution in substantially equal payments over your life expectancy. If the owner is a non-natural entity, ( e.g.
corporation or trust, etc), such proceeds are always subject to the 10% penalty.
Tuesday, May 5, 2009
Understanding the definition of a MEC in a Life Insurance Contract
Hello producers,
Prior to selling a life insurnace contract, all insurance agents should understand the definition of a MEC. I will be giving more detailed information in the near future.
Modified endowment contract: The MEC came into being with the 1988 amendment to the tax code (TAMRA, IRC Sec. 72 and Sec. 7702A). People were putting large sums of money into policies to accumulate funds on a tax-deferred basis. TAMRA provided that if a policy was over-funded (whether at issue or at a later date), it would be classified as a MEC, and any distribution representing a gain from the policy would be taxed.
The seven-pay test establishes limits to the amount of premiums that can be paid within a seven-year period. “Material changes” that occur to an in-force policy can cause a policy to be retested as if the changes existed since the beginning of the policy.
If a policy is or becomes a MEC, distributions will be taxed on a last-in first-out, or LIFO, basis to the extent of gain, subject to a 10 percent penalty, unless the distribution is made after age 59½, or if death, disability or annuitization occurs. Distributions include policy loans, cash dividends, withdrawals and surrenders.
If a policy becomes a MEC, it is “tainted” for as long as it exists and carries over to any policy that is issued in exchange for a MEC. A Sec. 1035 exchange is a material change for MEC purposes and is retested. Cash values that are transferred from the existing policy will not count as premium. If the policy fails the material change test, it will be classified as a MEC.
Sec. 1035 policy exchanges: When a policyowner exchanges an existing life insurance policy in accordance with IRC Sec. 1035, no gain is attributed on the exchange. The adjusted basis of the old policy is carried over to the new one. Only the newly added premium will be measured for MEC status. A Sec. 1035 exchange is allowed only when transferring cash values from an annuity to an annuity, life insurance to life insurance, or life insurance to an annuity contract.
Prior to selling a life insurnace contract, all insurance agents should understand the definition of a MEC. I will be giving more detailed information in the near future.
Modified endowment contract: The MEC came into being with the 1988 amendment to the tax code (TAMRA, IRC Sec. 72 and Sec. 7702A). People were putting large sums of money into policies to accumulate funds on a tax-deferred basis. TAMRA provided that if a policy was over-funded (whether at issue or at a later date), it would be classified as a MEC, and any distribution representing a gain from the policy would be taxed.
The seven-pay test establishes limits to the amount of premiums that can be paid within a seven-year period. “Material changes” that occur to an in-force policy can cause a policy to be retested as if the changes existed since the beginning of the policy.
If a policy is or becomes a MEC, distributions will be taxed on a last-in first-out, or LIFO, basis to the extent of gain, subject to a 10 percent penalty, unless the distribution is made after age 59½, or if death, disability or annuitization occurs. Distributions include policy loans, cash dividends, withdrawals and surrenders.
If a policy becomes a MEC, it is “tainted” for as long as it exists and carries over to any policy that is issued in exchange for a MEC. A Sec. 1035 exchange is a material change for MEC purposes and is retested. Cash values that are transferred from the existing policy will not count as premium. If the policy fails the material change test, it will be classified as a MEC.
Sec. 1035 policy exchanges: When a policyowner exchanges an existing life insurance policy in accordance with IRC Sec. 1035, no gain is attributed on the exchange. The adjusted basis of the old policy is carried over to the new one. Only the newly added premium will be measured for MEC status. A Sec. 1035 exchange is allowed only when transferring cash values from an annuity to an annuity, life insurance to life insurance, or life insurance to an annuity contract.
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