Quick Concepts. Now Available in JH Illustrator JOHN HANCOCK ADVANCED MARKETS. Providing you with tools you need to close cases

Transcription

1 Quick Concepts Now Available in JH Illustrator JOHN HANCOCK ADVANCED MARKETS Providing you with tools you need to close cases FOR AGENT USE ONLY. THIS MATERIAL MAY NOT BE USED WITH THE PUBLIC.

2 Quick Concepts, an illustration tool which is part of the JH Illustrator program, may help you consider and narrow down solutions to address client concerns. The Quick Concepts tool provides simple and short high-level presentations on planning approaches that utilize life insurance. Below is a snapshot of what the presentations look like: This cutting-edge presentation tool within the JH Illustrator product software provides a simplified version of the planning approaches that are available in the in-depth JH Solutions proprietary software, developed by John Hancock s Advanced Markets group. How ever, the Quick Concepts tool provides you with a simple starting point while running the product illustration. If and when more detailed presentations are required, the JH Solutions planning software may be used. To access a Quick Concept, click on the Concept tab. Then at the Concept Design screen, click on the drop-down menu and choose the concept to illustrate. The Quick Concepts presentations are accessible from the Presentation tab when viewing the illustration. Simply click on Presentations.

3 Currently, the Quick Concepts suite provides the following presentations outlined in the grids below that may be used to supplement a product illustration for clients. 1 Keep an eye out for updates on new presentations developed. SUMMARY OF EACH QUICK CONCEPTS PLANNING APPROACH TECHNIQUE PLANNING CONCERN SOLUTION BENEFITS CONSIDERATIONS Executive Bonus & REBA Plans Successful businesses are looking for ways to retain valuable employees. Deductible employer bonuses can cover the cost of an employer-owned life insurance policy that can provide security for a key employee s family, or be used for supplemental retirement income. Tax-favored income. Tax-free death benefit. Employee benefit. Employer deduction when bonuses are made. Simple to set up and administer. Bonus payments must be considered reasonable compensation. Gifting Analysis: Making Annual Gifts Assets transferred at death may be subject to transfer taxes: income, gift, and estate and/or generationskipping transfer (GST) taxes. Tax-free gifts can be made during lifetime and may be leveraged significantly with life insurance, outside the taxable estate. Removes future income and growth from taxable estate. Discounting may minimize transfer costs. The gift of assets during lifetime is irrevocable. Gifting Analysis: Using a Spousal Access Trust Access to assets given away by client during lifetime for wealth transfer purposes may be a client concern. By creating an ILIT that includes spousal access provisions, the noninsured spouse may benefit from the assets given away. Removes future income and growth from taxable estate. Trust may benefit non-insured spouse. The gift of assets during lifetime are irrevocable. Spouse s income needs must be assessed during lifetime. Invest in Your Life Liquidity is needed at death to pay mortgage, replace salary, pay estate taxes, restore an asset s value and/or equalize inheritance. Illustrate how life insurance offers liquidity, a competitive rate of return, and is self-completing. Provides heirs with liquidity. Rates of return on death benefit may be higher than the after-tax alternatives. Assess cash flow to pay premiums. Key Person Planning Continuation of the success of the business is based on key employee. Use life insurance to fund for the high cost of replacing key employee. Provides funds for replacement. Keeps business running. Policy cash values may be available. Policy may be ultimately transferred to employee as a benefit, or used by the employer to provide the employee supplemental income. Potential tax on cash values. Premiums are not deductible by employer.

4 Life Insurance in Retirement Planning (LIRP) Access to a qualified plan may not be available, or qualified plan contribution limits apply. Illustrate through careful design the benefits of using life insurance cash values as a supplement to retirement income. Tax-deferred accumulation. Tax-favored withdrawals. Tax-free death benefit. No contribution limits. Cost of insurance charges. Proper policy design is necessary. Withdrawals and loans reduce death benefit. a Deferred Annuity A deferred annuity remaining in the estate at death may be subject to estate and income taxes. Reposition a deferred annuity with a lifetime income stream, and leverage the income with life insurance. May provide lifetime income. Taxes may be minimized. May increase wealth transfer. The annuity principal may be irrevocably exchanged for income when a SPIA is used. Taxes, penalties and/or charges may apply. Municipal Bonds Tax-free, low-return municipal bonds, maintained for wealth transfer purposes, may be significantly depleted by transfer taxes. Exchange asset for Single Premium Immediate Annuity (SPIA), and leverage income with life insurance. May guarantee income. Reduces taxable estate. May transfer more to heirs. Asset is irrevocably exchanged for an income stream. The exchange may be taxable. Requires evidence of insurability. Qualified Plans/IRAs Client is preserving qualified plan or IRA assets for wealth transfer purposes. However, these assets may be taxed twice if maintained until death. By taking distributions from these assets, and making tax-free gifts to an Irrevocable Life Insurance Trust, the gifts can be leveraged with life insurance, outside the taxable estate. May reduce transfer taxes. May transfer significantly more to heirs. Current income tax on distributions. Surrender charges and/or penalties may apply when distributions are made. Other Assets (Income Max) Low income-producing assets, maintained for wealth transfer purposes, may be significantly depleted by transfer taxes. Exchange asset for Single Premium Immediate Annuity (SPIA), and leverage income with life insurance. May guarantee income. Reduces taxable estate. May transfer more to heirs. Asset is irrevocably exchanged for income. The exchange may be taxable. Requires evidence of insurability. Needs Analysis Calculator Calculates insurance needed to protect client s financial future. Determines amount of coverage needed based on a variety of expenses. Replace income for surviving family. Pay off family debt. Fund an education. Amount of life insurance may be more or less than the projections calculated. Quick Estate Tax Calculator Calculate amount of potential tax exposure. Fund an Irrevocable Life Insurance Trust (ILIT) with lifetime gifts to cover estate tax liability. ILIT can: Provide cash for heirs to fund estate taxes and other needs. Equalize inheritance and leverage assets transferring to heirs at death. Reduce potential estate tax liability through lifetime gifts to the ILIT. Gifts to ILIT are irrevocable.

5 Planning-at-a-Glance Reference Grid Use this grid to streamline planning by matching a solution from the Quick Concepts suite of planning approaches as a starting point to address client concerns: CONCERN SOLUTION Survivor Income Gift Taxes Estate Taxes Capital Gains Taxes Tax-favored Supplemental Income Maximize Wealth Transfer Cash-flow Constraints Employee Benefits Business Continuation Executive Bonus & REBA Plans Gifting Analysis: Making Annual Gifts Gifting Analysis: Spousal Access Trust Invest in Your Life Key Person 6 6 Life Insurance in Retirement Planning (LIRP) Maximization: Deferred Annuities Maximization: Municipal Bonds Maximization: Qualified Plans/IRAs Other Assets to Maximize Income Need Analysis Calculator 6 Non-Qualified Deferred Compensation (NQDC) Quick Estate Calculator Supplemental Executive Retirement Plan (SERP) 6 6 6

6 For agent use only. This material may not be used with the public. 1. Please see individual presentations for more information on considerations. Life insurance death benefit proceeds are generally excludable from the beneficiary s gross income for income tax purposes. There are a few exceptions such as when a life insurance policy has been transferred for valuable consideration. Trusts should be drafted by an attorney familiar with such matters in order to take into account income and estate tax laws (including the generation-skipping transfer tax). Failure to do so could result in adverse tax treatment of trust proceeds. Guaranteed features included in a life insurance policy are dependent upon minimum premium requirements and the claims-paying ability of the issuer. Loans and withdrawals from a life insurance policy will reduce the death benefit, cash surrender value, and may cause the policy to lapse. Lapse or surrender of a policy with a loan may cause the recognition of taxable income. Policies classified as modified endowment contracts may be subject to tax when a loan or withdrawal is made. A federal tax penalty of 10% may also apply if the loan or withdrawal is taken prior to age Cash value available for loans and withdrawals may be more or less than originally invested. This material is for informational purposes only. Although many of the topics presented may also involve tax, legal, accounting, or other issues, neither the issuer nor any of its agents, employees, or registered representatives are in the business of offering such advice. This material was not intended or written to be used, and it cannot be used, for the purpose of avoiding any penalty that may be imposed by the Internal Revenue Service. This material may have been written to support the promotion or marketing of the transactions or topics addressed by the written material. Individuals interested in these topics should consult with their own professional advisors to examine legal, tax, accounting, or financial planning aspects of these topics. Insurance products are issued by John Hancock Life Insurance Company (U.S.A.), Boston, MA (not licensed in New York) and John Hancock Life Insurance Company of New York, Valhalla, NY IM /10 MLINY