Blog #115: Part 2 of Leveraged Deferred Compensation
(Is Arthur Better Off With Term Insurance?)

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Last week in Blog #114, we examined a Leveraged Deferred Compensation plan for Arthur Lee who is being recruited as Chief Executive Officer of Ryder Manufacturing Co., Inc. (“Ryder”), a successful, privately-owned C corporation.  This week in Blog #115, we’ll evaluate if term insurance could be a better alternative than the indexed universal life (“IUL”) featured in Blog #114.

Leveraged Deferred Compensation involves Arthur reducing his compensation by $250,000 a year for five years.  In his 45% marginal income tax bracket, this reduction costs him $137,500 a year for five years for a total of $687,500.  In return, Ryder loans Arthur $250,000 a year for five years ($1,250,000) which he uses to fund a personally-owned $5.7 million IUL policy illustrated at 6.85%.  The policy is collaterally assigned to Ryder as security for the loans.

Arthur is scheduled to begin participating policy loans in year 21.  The first loan is planned at $1,400,000, of which $1,250,000 will be used to repay the outstanding split dollar loans due Ryder; the remaining $150,000 provides cash flow for Arthur during his first retirement year.  In subsequent retirement years, gradually increasing loans are scheduled which level out at $377,000 at age 85.  By age 95, they total $8,723,541 in cumulative spendable cash flow for Arthur.  At that point, Arthur’s residual net cash value is $1,824,573 surrounded by a net death benefit of $2,076,566 for his heirs.

The plan is appealing to both Arthur and Ryder; however, one of Ryder’s financial advisers wants to see if “term and invest the difference” will perform better for Arthur if it is substituted for the Indexed Universal Life (“IUL”).

Below is a graphic of Arthur’s costs and benefits of the Leveraged Deferred Compensation plan:

Bob Ritter's Blog 115, a graphic of Arthur’s costs and benefits of the Leveraged Deferred Compensation plan image

Click here to review the year-by-year numbers.

Term Insurance as an Alternative

You never know when term insurance will surface, so my recommendation to you is that you always prepare a “permanent vs. term” comparison for each presentation.  You may not need it, but if you do, you’ll be glad you have it.

Think about this: you may want to present it whether term insurance is brought up or not.  Why bring it up if it is apparently not an issue?  Because it may surface from an adviser when you are not present, and having it previously presented allows your prospect(s) to be proactive about the alternative.  Instead of “I’ll look into it,” they can say, “Term insurance was already evaluated; the results do not favor it, and here are the calculations.”

The IUL in Blog #114 has a face amount of $5,700,000.  I am using only $4,450,000 of 20-year term insurance in the comparison since, due the split dollar arrangement of the Leveraged Compensation Plan, the net death benefit to Arthur’s family drops to $4,450,000 by year 5.  Thus, for the first four years, the IUL has more death benefit, a marginal advantage due to the short duration.

The best rate I could surface for $4,450,000 of 20-year term is $4,700 (male, age 45, preferred plus).  I used the same contribution level as the Leveraged Deferred Compensation ($137,500 for five years).  For the comparison, I used an equity account with a yield of 6.85% (same as the IUL) plus a 2.00% dividend for a total yield of 8.85%.

Of course, there is no legal way to “split dollar” term insurance and an equity account; however, even if you could, the dismal results of a “buy term and invest the difference” evaluation vs. Arthur’s personal costs and benefits of his Leveraged Deferred Compensation plan are significant.  Below is a graphic of the comparison from the InsMark Illustration System:

Bob Ritter's Blog 115 term insurance an equity account personal costs and benefits of leveraged deferred compensation image

Click here to review the entire term comparison report.

In his 45% marginal income tax bracket, the $250,000 compensation adjustment costs Arthur $137,500 a year for five years for a total of $687,500.  I used the same deposit pattern for the equity account and the term insurance.  Arthur is scheduled to begin participating policy loans from the IUL starting at the beginning of year 21, and I matched this after tax cash flow with the same after tax cash flow from the equity account.  Unfortunately, the equity account collapses in year 32 at age 76 as you can see on Page 3 of the report while the IUL is still performing at age 95 with $1,824,573 of residual cash value remaining surrounded by a net death benefit of $2,076,566 for his heirs.

In order to compete with Arthur’s share of the IUL, the equity account in this comparison would have to earn 11.18% plus the 2.00% dividend for a total yield of 13.18%, 633% basis points higher than the IUL.

Conclusion

I have made this comparison in my Blog using small, medium, and large cash value life insurance policies.  “Buy term and invest the difference” simply does not compete with 21st century cash value life insurance.  There is no economic theory that explains why a bad idea is acceptable just because you hear it frequently.  If you have the cash flow to buy what you want, cash value life insurance is the only logical choice.

I am reminded once again of Bill Boersma’s comment in his article in the December 2014 issue of Trusts & Estates in which he discusses life insurance as an asset class: “I can only wonder if another asset with the same qualities would be implemented more frequently if it wasn’t called life insurance.”

Suitability of Leveraged Deferred Compensation

  • For owner-executives of C corporations: Yes.
  • For non-owner executives of any business entity (C corporation, S corporation, Limited Liability Company, Partnership, and Limited Liability Partnership): Yes.
  • For executives of Tax Exempt Organizations: Yes.
    Note:  See Blog #40 for an example.
  • For an independent consultant to any business entity (C corporation, S corporation, Limited Liability Company, Partnership, Limited Liability Partnership, and Tax Exempt Organization): Yes.
  • For officers and directors of a publicly-owned corporation: No.

    Note:  This is due to the Sarbanes-Oxley Act of 2002 which precludes use of loan-funded plans for such individuals.
  • For managers and independent consultants of publicly-owned corporations: Yes.
  • For executives of governmental organizations: Yes

 

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

Blog115.zip

Download all workbook files for all blogs

Experienced Zip File Downloaders Download the zip file, open it, and double click the Workbook file name to open it in your InsMark System.

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.

 

InsMark’s Referral Resources
(Put our Illustration Experts to Work for Your Practice)

We created the Referral Resources listed below to deliver a “do-it-for-me” illustration service in a way that makes sense for your practice.  All are IMOs and InsMark Agency Platinum Power Producers®, and they are highly skilled at running InsMark software.  They will utilize your choice of insurance company, and they do not require a commission split.

Mention my name when you talk to our Referral Resources as they have promised to take special care of my readers.  My only request is this: if a Referral Resource helps you get the sale, place at least that case through them; otherwise, you will be taking unfair advantage of their generous offer to InsMark licensees.

Save time and get results with any InsMark illustration!

Joint Interviews

If you want or need help from a qualified producer for joint interviews with any InsMark illustration and are willing to share the case, email us at bob@robert-b-ritter-jr.com, and we will provide you with recommendations.

Testimonials:

“InsMark’s Checkmate® Selling strategy of permanent vs. term is still one of the most compelling tools to bring a client to a definitive decision, based on their best case alternatives!!!  Solid mathematical comparisons that prove the validity of our insurance solution!!!”
Frank Dunaway, III, CLU, Legacy Advisory Services, Carthage, MO

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Doug Peete, Past President, Top of the Table, InsMark Silver Power Producer®, Overland Park, KS

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David McKnight, Author of The Power of Zero, InsMark Gold Power Producer®, Grafton, WI

 

Important Note #1:  The hypothetical life insurance illustrations associated with this Blog assumes the nonguaranteed values shown continue in all years.  This is not likely, and actual results may be more or less favorable.  Actual illustrations are not valid unless accompanied by a basic illustration from the issuing life insurance company.

Important Note #2:  Many of you are rightly concerned about the potential tax bomb in life insurance that can accidentally be triggered by a careless policyowner.  Click here to read Blog #51: Avoiding the Tax Bomb in Life Insurance.

Important Note #3:  The information in this Blog is for educational purposes only.  In all cases, the approval of a client’s legal and tax advisers must be secured regarding the implementation or modification of any planning technique as well as the applicability and consequences of new cases, rulings, or legislation upon existing or impending plans.

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More Recent Blogs:

Blog #114: Leveraged Deferred Compensation (Part 1)

Blog #113: Life Insurance Alternatives to a 401(k)

Blog #112: Retirement Planning Strategies Using Indexed Universal Life

Blog #111: Part 2 of the Impact of New Regulations on Indexed Universal Life

Blog #110: Impact of New Regulations on Indexed Universal Life (Part 1 of 2)

 

3 Reasons Why It’s Profitable For You To Share These
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Professional Study Groups (i.e. “LinkedIn”)

 

Robert B. Ritter, Jr. Blog Archive

 

Blog #102: Linking Indexed UL
with Disability Income Insurance
(Part 2 of 2)

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(Click here for Blog Index)

(Presentations in this blog were created using the InsMark Illustration System and Wealthy and Wise®.)

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Last week in Blog #101, we examined a benefit plan for Tom Hamilton, Chief Marketing Officer, a key rainmaker, and a non-owner executive of Acme Ford, LLC.  The purpose of that plan is to provide benefits for Tom and his family in the event of:

  • Disability;
  • Early death;
  • Retirement;
  • Long-term care needs.

I coupled an Indexed Universal Life policy with a Disability Income policy, both funded by way of a Controlled Executive Bonus Plan using a gross-up bonus.  All four benefits were provided for no out-of-pocket cost for Tom — unless he voluntarily terminates his employment during the first 7 years in which case he owes Acme Ford the sum total of the bonuses paid.  (Hence, the use of the word “Controlled” in the title of the plan.)

Here again are Tom’s repayment obligations:

blog-102-img-2-snapshot-of-the-first-7-years-outlining-toms-repayment-obligations-image

Let’s suppose that Tom likes the benefits but he declines to participate in the plan.  This could be caused by several reasons, the most likely being:

  • His concern about the potential repayment liability shown in Column (6);
  • His reluctance to commit to at least seven years of employment with Acme Ford in light of other employment opportunities that may surface.

Tom asks his broker, “I really like the overall benefits — is there any way Jennifer and I can duplicate them personally?”

His broker responds, “Let’s try to integrate them into your overall wealth planning analysis and see what we can generate.”

Case Study

Below is a summary of Tom and Jennifer Hamilton’s net worth:

blog-102-img-3-summary-of-Tom-and-Jennifer-Hamiltons-net-worth-image

1 Cost basis of $150,000; anticipated additional contributions: $25,000 yearly until retirement.

2 Anticipated additional contributions: $18,000 yearly until retirement.

3 Anticipated additional contributions: $18,000 yearly until retirement.

4 Recently inherited from her father.

5 Anticipated liquidation at retirement (net proceeds reinvested in equity account).

These assets will be used as the basis for an analysis in Wealthy and Wise®, our wealth planning system.

Click here for comments about yields and Monte Carlo simulations.

The Impact of Inflation on Retirement Cash Flow Projections

Inflation — the governments damage to currency as a store of value.

Tom and Jennifer are ages 40 and 35.  Their current after tax income is $250,000, and they would like to establish the future equivalent of that number for their retirement after tax cash flow.

They have 25 years until they expect to retire.  Using a 3.00% inflation factor, their retirement cash flow at that time must begin at $523,444 to provide the equivalent of $250,000 in today’s dollars.

To further offset inflation, that $532,444 needs to increase by 3.00% annually thereafter.  The illustrations that follow are developed through their ages 95/90 — slightly past their joint life expectancy of 92/87.  The final year’s cash flow is $1,233,531 — still only $250,000 in today’s dollars.

blog-102-img-4-see-comments-below-imageThese can be frightening numbers, but if you believe inflation is here to stay, your retirement plans must take it into account.  And who knows if 3.00% inflation is an accurate long-range assumption?  This is why Tom and Jennifer’s plan needs to be monitored at least annually in order to make adjustments to all assumptions based on then-current facts and circumstances.

Note:  In all cases, be certain your clients participate in arriving at the inflation percentages to use.

In the Wealthy and Wise reports that are available below, the buying power of the desired retirement cash flow is highlighted in red.  This is particularly valuable for a client who, when looking at Pages 14 or 59, asks: “Why do you figure I need $1,233,531 of cash flow at age 94.”  As the buying power numbers show in the adjacent column, it’s the equivalent of $250,000 in today’s dollars.

Scary, but true — assuming only 3.00% inflation!

Note to Wealthy and Wise users:  The menu prompt to include the buying power column is at the bottom of the Preliminary Data tab.

Net Worth Analysis

Below are the long-range net worth implications for the Hamiltons using their current asset base to provide the after tax retirement cash flow noted above.

Strategy 1 – Current Plan
Hypothetical Net Worth

blog-102-img-5-Strategy-1-Current-Plan-Hypothetical-Net-Worth-graph

Let’s next include the Indexed Universal Life policy.  Premiums are $60,000 for seven years with loans for needed cash flow beginning at age 65.  We’ll also include the Disability Income policy with premiums of $7,200.  Both premiums are funded by allocations from the Hamiltons current asset base.

Below are the long-term net worth results of this alternative strategy:

Strategy 2 – Proposed Plan
Hypothetical Net Worth
Including Indexed Universal Life and Disability Income Policies

blog-102-img-6-Strategy-2-Proposed-Plan-Hypothetical-Net-Worth-Including-Indexed-Universal-Life-and-Disability-Income-Policies-graph

Here are both Strategies — superimposed on one another:

Strategy 1 vs. Strategy 2

Hypothetical Net Worth

blog-102-img-7-Strategy-1-vs-Strategy-2-Hypothetical-Net-Worth-graph

Wealth to heirs is also impressive:

blog-102-img-8-Wealth-to-heirs-is-also-impressive-graph

The Takeaways

The Strategy 2 benefits to Tom and Jennifer are considerable:

  • No personal out-of-pocket cost for the life insurance and disability income policies;
  • A disability income benefit with annualized tax free income of $150,000+;
  • $2,600,000 of life insurance death benefit during pre-retirement years;
  • A substantial post-retirement death benefit much of which can be advanced in the event of qualifying long-term care needs;
  • Annual, tax free, retirement cash flow of $523,444 starting at age 65 increasing gradually to $1,233,531 by age 95 (totaling in excess of $25,000,000);
  • Residual net worth in the final year illustrated of almost $19,000,000;
  • An improvement in wealth to heirs in all years.

To my knowledge, Wealthy and Wise is the only planning system that can produce these results and illustrate them with year-by-year mathematical backup.

blog-102-img-9-click-here-for-blog-52-imageThe gain of $7.2 million in net worth is significantly caused by the participating policy loans from the Indexed Universal Life providing a substantial amount of the retirement cash flow thereby putting considerably less strain on their other assets.  During pre-retirement years, the cash value of the policy is responsible for replacing assets used for premiums.

Click here to review the illustration for the $2.6 million Indexed Universal Life policy from the InsMark Illustration System.  This one is slightly different from the policy illustrated in Blog #101.  Instead of using loans from the policy in pre-retirement years to fund the Disability Income policy as we did in Blog #101, we will use asset withdrawals in the Wealthy and Wise analysis referenced below.  This provides greater cash flow from policy loans in retirement years.

Click here to review the illustration for the Disability Income policy.  (Page 3 is particularly impressive.)  Are you covering the disability risk for your clients?  Good as the overall benefits are for Tom and Jennifer, without the disability coverage, their plan is a chair with only three legs: death benefit, retirement cash flow, and long-term care.  Without the coverage, it likely collapses should disability occur.

Many people object to the cost of disability premiums.  If you can blend the cost into an overall wealth plan by using assets as a premium source, the objection usually disappears.

Click here to review the reports from Wealthy and Wise.

blog-102-img-10-Throughout-the-Strategy-2-reports-in-the-Wealthy-and-Wise-analysis-imageThis Wealthy and Wise presentation contains 97 pages of reports, partly due to the young age of the clients creating 55 years of data.  This requires most reports to go to two pages so in reality, you are only dealing with 40 or so different reports.  That still is a ton, but with this System, I recommend that you have all the reports for a given case with you when you are visiting with a client or client’s attorney or CPA.  Wealthy and Wise backs up every number shown, and you never know which report you’ll need to answer the inevitable question, “Where does this number come from?”  That’s why I provided all of them to you in this Blog; however, most Wealthy and Wise users select a few key illustrations for the main report and put the balance in an Appendix.

Monitoring Fees

The Case Study in this Blog does not include any monitoring fees you might charge as described in Blog #99.  If your securities licensing allows it, you can certainly justify annual monitoring fees to keep this Wealthy and Wise analysis up-to-date.  Do not treat it as a “one and done” retirement plan.  Your clients deserve your regular involvement, and you will lose clients without it.  Comprehensive monitoring will also help ward off potential litigants as any Wealthy and Wise evaluation will gradually fall further and further out of date without your participation.

Disability Resources

I know many of you currently have a disability resource, but for those who want a vital new relationship, we strongly recommend Disability Insurance Services in San Diego, CA, an InsMark Referral Resource, for disability income and long-term care.

Quotes are available for:

  • Individual Disability Income Insurance;
  • Business Overhead Expense Insurance;
  • Disability Buy/Sell Insurance;
  • Critical Illness Insurance;
  • Long Term Care Insurance;
  • Bank Loan (ensuring repayment of loans);
  • Lump Sum Key Person Insurance;
  • Multi-life cases.

Click here for a link to the InsMark DI Quoting Service to request a proposal for any of the disability plans listed above.

 

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.

New Zip File Downloaders
Watch the video.

Digital Workbook Files For This Blog

Blog102.zip

Download all workbook files for all blogs

Experienced Zip File Downloaders Download the zip file, open it, and double click the Workbook file name to open it in your InsMark System.

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.

 

Licensing InsMark Systems

For licensing information regarding the InsMark Illustration System and Wealthy and Wise, contact Julie Nayeri at julien@insmark.com or 888-InsMark (467-6275).  Institutional inquiries should be directed to David Grant, Senior Vice President – Sales, at dag@insmark.com or (925) 543-0513.

InsMark’s Referral Resources
(Put our Illustration Experts to Work for Your Practice)

We created the Referral Resources listed below to deliver a “do-it-for-me” illustration service in a way that makes sense for your practice.  All are IMOs and InsMark Agency Platinum Power Producers®, and they are highly skilled at running InsMark software.  They will utilize your choice of insurance company, and they do not require a commission split.

Mention my name when you talk to our Referral Resources as they have promised to take special care of my readers.  My only request is this: if a Referral Resource helps you get the sale, place at least that case through them; otherwise, you will be taking unfair advantage of their generous offer to InsMark licensees.

Save time and get results with any InsMark illustration!

Joint Interviews

If you ever want or need help from a qualified producer for joint interviews with any InsMark illustration and are willing to share the case, email us at bob@robert-b-ritter-jr.com, and we will provide you with recommendations.

Testimonials

“InsMark has created without question the best suite of software for our industry that has ever existed.  I personally have been using their software for almost 30 years, and it changed my career.  This unique and user friendly software will add many thousands to your income for as long as you’re in business.  InsMark makes me look good, and it will you as well.”
Simon Singer, CFP®, CAP®, RFC®, InsMark Platinum Power Producer®, Encino, CA
“InsMark helps us help our clients understand their money and their choices.  I always learn something new that changes what we do and how we can do it more efficiently.  That translates to a better bottom line for us and for our clients.  It’s making more money for everyone — just by pushing InsMark buttons on the computer.”
Kay Corbin, CLU, ChFC, InsMark Platinum Power Producer®, Phoenix, AZ
“I am writing to give you a ringing endorsement for the Wealthy and Wise System.  As you know, I am a LEAP practitioner.  The Wealthy and Wise software has helped me supplement my LEAP skills in the over age 60 client base.  I have been paid for many cases using Wealthy and Wise as support, the smallest of which was $27,000, the largest was $363,000.  With those type of commissions, you would have to be nuts not to buy it.”

Vincent M. D’Addona, CLU, ChFC, MSFS, AEP, InsMark Platinum Power Producer®, New York City, New York

 

Important Note #1:  The hypothetical life insurance illustration associated with this Blog assumes the nonguaranteed values shown continue in all years.  This is not likely, and actual results may be more or less favorable.  Actual illustrations are not valid unless accompanied by a basic illustration from the issuing life insurance company.

Important Note #2:  Many of you are rightly concerned about the potential tax bomb in life insurance that can accidentally be triggered by a careless policyowner.  Click here to read Blog #51: Avoiding the Tax Bomb in Life Insurance.

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More Recent Blogs:

Blog #101: Linking Indexed UL with Disability Income Insurance
(Part 1 of 2)

Blog #100: Mysterious Fees for Mutual Funds

Blog #99: One More Time – The Value of “You” to Your Clients

Blog #98: The Value of “You” to Your Clients (Part 2 of 2)

Blog #97: The Value of “You” to Your Clients (Part 1 of 2)

 

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

 

Blog #101: Linking Indexed UL
with Disability Income Insurance
(Part 1 of 2)

(Click here for Blog Archive)
(Click here for Blog Index)

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

Getting Started with InsMark Training Video

Bob Ritter's Blog #101 Linking-Indexed-UL-with-Disability-Income-Insurance-(Part-1-of-2) image

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Since May is Disability Insurance Awareness Month, this Blog is dedicated to some thoughts on disability income insurance linked with life insurance.

When I was active as a producer, I pretty much shied away from disability income insurance due to the terrible underwriting issues that always seemed to plague my applications.  My friends in the business tell me that this has eased considerably in recent years, and many of them consider disability income coverage to be a significant part of their practice.

The coverage issues that affect all your clients are fourfold:

  • Disability;
  • Early death;
  • Retirement;
  • Long-term care.

All four can be addressed with a cash-rich life insurance policy with accelerated death benefits combined with a disability income policy.  This combination can be used effectively for individuals and executive benefits.

Case Study of an Executive Benefit

Tom Hamilton is Chief Marketing Officer, a key rainmaker, and a non-owner executive of Acme Ford, LLC.  The owners plan to sell the company in five years.  The goal is to provide a benefit package for Tom that causes him to remain with the firm for at least the next seven years (including two years after the expected sale of the company in order to remain a resource for the new owners).

They plan to provide Tom with a Controlled Executive Bonus plan in which the max-funded life insurance policy coupled with a disability income policy helps solve all four issues: disability, early death, retirement, and long-term care, as follows:

  • An employer-paid gross-up bonus is used to fund the premiums on the policy owned by Tom.
  • To help with needed family income should disability occur during pre-retirement years, Tom makes loans on the policy which he uses to pay for a personal, long-range, disability income policy with a benefit of $12,750 a month and annual premiums of $7,200.  (In this example, the policy loans don’t start until year 2, so an additional gross-up bonus is paid by the firm during the first year so Tom can net the needed $7,200.)
  • The policy death benefit serves the family well in the event of Tom’s early death.
  • The extensive after tax cash flow from policy loans adds an important source of retirement income.
  • In the event that institutional or home care is needed during retirement, an advance of a portion of the policy death benefit provides needed dollars.

Here is a flow chart of the case:

Controlled Executive Bonus Plan

blog-101-controlled-executive-bonus-plan-flow-chart-image

Click here for a copy of this Flow Chart for your personal use.

The question that Acme Ford has to answer is this: Will this plan glue Tom to the firm for 7 years?  For the answer, check out the snapshot below of the first 8 years outlining Tom’s repayment obligations.  There is a swing in Tom’s favor of $725,000 between his loss in year 7 and his gain in year 8.  This, coupled with the potential losses in prior years and the immense gains in subsequent years, should produce some serious superglue.

blog-101-snapshot-of-the-first-8-years-outlining-toms-repayment-obligations-image

Note:  In the plan documentation, Tom’s obligation to repay the bonuses during the first seven years would typically be waived should he die or be terminated without cause.

Another interesting aspect of the Controlled Executive Bonus plan is that, in view of the repayment liability, Tom may refuse to participate.  With the array of benefits provided by the plan, what would his refusal tell Acme Ford?  My guess is that Tom would likely be considering another employment offer.  What an unexpected management tool this could turn out to be!

Click here to review Tom’s Controlled Executive Bonus illustration using the Executive Security Plan module from the InsMark Illustration System.

The benefits to Tom are considerable:

  • No personal out-of-pocket cost;
  • A disability income policy with annualized tax free income of $150,000+;
  • A seven-figure pre-retirement life insurance death benefit;
  • A substantial post-retirement death benefit;
  • Annual, tax free, retirement cash flow of $125,000;
  • Residual cash value in the final year illustrated at $1.1 million.

Benefits to Acme Ford are the retention of a valuable key executive plus all plan funding is tax deductible.

Note:  In the absence of a business to fund the plan, the logic of this presentation will work for an individual as well.  In Part 2 next week, you’ll see how Tom can acquire this plan even if Acme Ford is unwilling to provide it.

Click here for a link to the disability income proposal used for the case study example above.  Most of you know how strongly I feel about comparison selling.  Pay particular attention to Page 3 to see the effective comparative strategy in the quote.

Note:  The disability income proposal and the carrier’s basic illustration should accompany the Controlled Executive Bonus illustration.

Conclusion

Good as the overall benefits are, without the disability income policy, Tom’s plan is a chair with only three legs: death benefit, retirement cash flow, and long-term care.

Resources

I know many of you currently have a disability resource, but for those who want a vital new relationship, we strongly recommend Disability Insurance Services in San Diego, CA, an InsMark’s Referral Resource, for disability income and long-term care.

Quotes are available for:

  • Individual Disability Income Insurance;
  • Business Overhead Expense Insurance;
  • Disability Buy/Sell Insurance;
  • Critical Illness Insurance;
  • Long Term Care Insurance;
  • Bank Loan (ensuring repayment of loans);
  • Lump Sum Key Person Insurance.

Click here for a link to the InsMark DI Quoting Service to request a proposal for any of the plans listed above.

 

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.

New Zip File Downloaders
Watch the video.

Digital Workbook Files For This Blog

Blog101.zip

Download all workbook files for all blogs

Experienced Zip File Downloaders Download the zip file, open it, and double click the Workbook file name to open it in your InsMark System.

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.

 

Licensing InsMark Systems

To license the InsMark Illustration System and/or Documents On A Disk, contact Julie Nayeri at julien@insmark.com or 888-InsMark (467-6275).  Institutional inquiries should be directed to David Grant, Senior Vice President – Sales, at dag@insmark.com or (925) 543-0513.

InsMark’s Referral Resources
(Put our Illustration Experts to Work for Your Practice)

We created the Referral Resources listed below to deliver a “do-it-for-me” illustration service in a way that makes sense for your practice.  All are IMOs and InsMark Agency Platinum Power Producers®, and they are highly skilled at running InsMark software.  They will utilize your choice of insurance company, and they do not require a commission split.

Mention my name when you talk to our Referral Resources as they have promised to take special care of my readers.  My only request is this: if a Referral Resource helps you get the sale, place at least that case through them; otherwise, you will be taking unfair advantage of their generous offer to InsMark licensees.

Save time and get results with any InsMark illustration!

Joint Interviews

If you want or need help from a qualified producer for joint interviews with any InsMark illustration and are willing to share the case, email us at bob@robert-b-ritter-jr.com, and we will provide you with recommendations.

Testimonials:

“InsMark is the Picasso of the financial services world – their marketing savvy never fails to amaze me.”
Doug Peete, Past President, Top of the Table, InsMark Silver Power Producer®, Overland Park, KS

“I really thought I knew all the sales techniques that affect my business, but I do now, thanks to InsMark.”
Sam Keck, MBA, CLU, CFP, LUTCF, InsMark Platinum Power Producer®, Financial Planner, Denver, CO

 

Important Note #1:  The hypothetical life insurance illustration associated with this Blog assumes the nonguaranteed values shown continue in all years.  This is not likely, and actual results may be more or less favorable.  Actual illustrations are not valid unless accompanied by a basic illustration from the issuing life insurance company.

Important Note #2:  Many of you are rightly concerned about the potential tax bomb in life insurance that can accidentally be triggered by a careless policyowner.  Click here to read Blog #51: Avoiding the Tax Bomb in Life Insurance.

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More Recent Blogs:

Blog #100: Mysterious Fees for Mutual Funds

Blog #99: One More Time – The Value of “You” to Your Clients

Blog #98: The Value of “You” to Your Clients (Part 2 of 2)

Blog #97: The Value of “You” to Your Clients (Part 1 of 2)

Blog #96: Retirement Cash Flow Funded by Premium Financing

 

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