Blog #2: Anyone Want a Free Dog?

(Presentations in this Blog were created using the InsMark Illustration System.)

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A dog you want costs $500.  Your boss wants to help you buy it, so she gives you a $500 bonus.

Is it a free dog?  No — because you have to pay the tax on the bonus.  If you’re in a 40% tax bracket, the dog costs you $200.

So let’s see if your boss will help you out.  You ask her to increase the bonus to $833. If so, you’ll pay $333 in income tax and have $500 left over to buy the dog.

Would this get you a free dog?  Yes — but it doesn’t matter because she won’t do it.  All she’ll come up with is the $500.

We have to find a way to pay the $200 tax on the $500 bonus — and pay for the dog.

Free dog life insurance image What if we could find a bank to take the dog as collateral for a $200 loan? And the bank added the interest to the loan? And the loan included free dog life insurance so when the dog died, the loan was paid off?

Now that would be a free dog!

Let’s see if we can make this work with a life insurance policy.

Assumptions:

Executive: Age 45;
Initial face amount of policy: $1,184,217;
Premium: $50,000 a year for 5 years;
Bonus from employer: $50,000 a year for 5 years;
Income tax due by executive (40% tax bracket): $20,000 a year for 5 years;
Policy loans by the executive to cover the income tax: $20,000 in years 2 through 6*;
Policy loans by the executive for retirement cash flow from age 65 to 95: $55,000 a year.

You won’t get a bank to help you with the free dog, but you can certainly get a business and a life insurance company to join in a transaction that resembles it.

It’s called an Executive Bonus Plan, and it’s designed to reward a valuable executive with a benefit that, like the free dog, cannot be duplicated personally.

Below are the illustrated results for this plan from the InsMark Illustration System software.

Excutive's 50 year graphic analysis

Click here to see reports for this Executive Bonus Plan from the InsMark Illustration System software.

InsMark’s Referral Resources

If you would like assistance with any InsMark illustration, contact any of the Referral Resources listed below.  All are InsMark Agency Platinum Power Producers®, and they are highly skilled at running InsMark software and can help you using your choice of insurance company.  Mention my name when you talk to one of our Referral Resources as they have promised to take special care of my readers.

computer screenInsMark’s Documents On A Disk™ System (DOD) has specimen legal documents for installation of several variations of the Executive Bonus Plan. Click here for Highlights of the Plan of the one typically used for non-owner employees. Click here for Highlights of the Plan of the one typically used for owner-employees. Click here to review features of DOD.

Click here to see reports for this Executive Bonus Plan from the InsMark Illustration System software.

 

InsMark’s Digital Workbook Files

If you would like some help creating customized versions of the presentations in this Blog for your clients, watch the video below on how to download and use InsMark’s Digital Workbook Files.

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Digital Workbook Files For This Blog

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Note:  If you are viewing this on a cell phone or tablet, the downloaded Workbook file won’t launch in your InsMark System.  Please forward the Workbook where you can launch it on your PC where your InsMark System(s) are installed.

 

*Some life insurance companies do not allow policy loans in the first year. In this event, loans could be made in years 2 through 6.  From a cash flow perspective, this should generally be satisfactory due to the delay between when the bonus is paid and the income tax is due.

 

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Blog #1: “Tell Me What’s Wrong With It?”

 

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Robert B. Ritter, Jr. Blog Archive

 

Blog #1: “Tell Me What’s Wrong With It?”

(There are no InsMark presentations used in this blog. It is a an informational blog only)

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Near the end of a sales interview where you have fully covered all the bases, a customer will often ask you, “You told me all the good things – now tell me what’s wrong with it?”

Many planners are uncomfortable with this question, but in reality it indicates your customer is close to buying – and you’d better be prepared with a reasonable answer.

Never say, “There is nothing wrong with it.”

If you are presenting life insurance, you might say this: “You have to pass a physical exam to get the policy. When would be a good time to schedule that?” You’ll next be talking about the physical, and “What’s wrong with it?” is long gone.

If you are presenting a new investment idea or strategy, you might say something like this, “You have to qualify financially to take advantage of it. Let me get some information about that.” You’ll next be talking about the financial qualifications, and “What’s wrong with it?” disappears.

InsMark’s Referral Resources

If you would like assistance with any InsMark illustration, contact any of the Referral Resources listed below.  All are InsMark Agency Platinum Power Producers®, and they are highly skilled at running InsMark software and can help you using your choice of insurance company.  Mention my name when you talk to one of our Referral Resources as they have promised to take special care of my readers.

seperator image

3 Reasons Why It’s Profitable For You To Share These
Blog Posts With Your Business Associates and
Professional Study Groups (i.e. “LinkedIn”)

 

Robert B. Ritter, Jr. Blog Archive