Take Care of 2 issues with 1 Strategy

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1 TBA works with Advisors to help find opportunities for their clients and deliver solutions that protect their future. We do this by: Delivering marketing support and education that will help advisors uncover opportunities Providing sales support and case design that will help you deliver the best solution Offering state of the art case management from beginning to end and extensive underwriting expertise to get the best offer Giving you accessibility via advanced technology including real time case status and communication. Highest rated carriers and products For 50 years, TBA has delivered a personalized approach that helps clients succeed! Inside this issue: Pass it On Marketing Kit 2 Beneficiary Review 2 Stretch-Out IRA Strategy 3 Annuity Max 4 How to identify a client 4 CD vs. Linked Benefit Product 5 Did you know... 6 Sell from the Balance Sheet If your clients are having a hard time finding the cash flow to pay for coverage they need, take a look at their Balance Sheet! Do they have assets that can be better utilized? If they are over 59 1/2, the answer may be yes! Wealth Transfer is the subject of this newsletter and there are multiple sales ideas and tools that can help you work with your clients to find creative ways to finance insurance as well as help them find better ways to move assets onto heirs in a more tax efficient way. You can make a very real difference. Face it, while we are in the insurance business, we need to be in the Income Tax Planning business as well. You have heard that the only thing Take Care of 2 issues with 1 Strategy Your clients have worked hard to grow their taxdeferred assets such as annuities and qualified plans like IRA s. They may not need some of those assets for income and they will be passed on to children and grandchildren. Unfortunately those assets do not pass on tax efficiently and are taxed at the beneficiaries tax bracket, which in many cases is higher. In addition your clients may have a need to protect themselves against the possible costs of long-term care. The Pass It On strategy can show your clients how to reposition those assets and protect themselves against the cost of long term care. Here s how it works: Your client can begin taking distribution out of the tax deferred asset and pay the tax on the distribution. With the money left over, they purchase a life insurance policy. The new policy is not just any life insurance policy. It is one with a long term care benefit that will allow them to access the death benefit in the event they need it for long term care expenses. If they don t need it for long-term care then they have a tax free death benefit that gets passed on to the children and grandchildren. In the event they have an annuity they can also transfer the annuity to an immediate annuity and use the income from the SPIA to fund the policy. John W. Felton, IV for sure is death and taxes! You have the unique ability to help your clients reduce the amount of taxes they pay and insurance is a great vehicle for that! There are over 2 trillion dollars in annuities inforce in this country and only 10% of those are annuitized! This is a great opportunity for you to help. While annuities are great accumulation vehicles, they are awful wealth transfer vehicles! Take the time to talk to your clients about ways you can help them pass more of their IRA or annuities onto their heirs. We have a complete turnkey solution that will help you do just that! Take a look at our Pass it On Marketing Program!

2 Page 2 Free Pass It On Turn-key Marketing Kit from TBA! Turnkey Marketing Kit: Pre-Approach Letter - This letter will alert your clients to the need to look at the assets they have accumulated tax deferred and ways you may be able to help them reposition them on a tax favored basis. Tri-Fold Client Brochure - This client friendly piece talks about assets and tax deferral in language they can understand. It simply alerts them to other options. This piece can be personalized with your logo and contact information. It does not have TBA or any other company information on it! Client Presentation - This is the heart of the program. With the information you provide us, we create a custom presentation you take to your client that highlights better ways to pass their assets onto their heirs. It contains multiple facts and figures that help them make the buying decision easy! Beneficiary Reviews are vital to Wealth Transfer Even if you never convince your client to take advantage of the benefits of Wealth Transfer, if is very important that you discuss the beneficiaries of their assets. What do you want to happen to your wealth after you re gone? It s not a comfortable topic to go over with your client but is important to consider. Their beneficiary designation can have a profound effect on what your heirs can do with their assets. In general, beneficiary designations should be Up-to-date: Ask your client When did you last check your beneficiary designations? Changes in their family situation, tax laws and overall wealth make a periodic beneficiary review a necessity. The most common errors are to never name a beneficiary and to fail to update beneficiaries when situations change. Flexible: None of us know when our time will come or what our exact financial situation will be at that time...and your clients don t either. Consider having them use both primary and contingent beneficiaries. A contingent beneficiary will receive the asset if the primary beneficiary dies before the account owner or if the primary beneficiary refuses the asset. For married people, a spouse as primary beneficiary and the children as contingent is a common and flexible designation. This way they at least have a back-up plan if they never go back and do a review. Each situation is unique. Discuss with your client what they want to happen to their assets. If they do not have a beneficiary on each of their assets, the family is left to deal with the mess at one of their most vulnerable times. Client Postcard On Beneficiary Review Available from American General

3 Page 3 Stretch-Out IRA Strategy Do you have clients in the fortunate position of not needing all of their IRA assets to supplement their retirement income needs. As a result, their goal is to pass on their IRA assets to the next generation. The problem they face is that federal estate and income taxes could significantly reduce the value of the IRA they intend to pass on to their beneficiaries. With the right kind of planning, they can avoid this depletion of their IRA assets and create a legacy of lifetime income for their beneficiaries. The critical words here are the right kind of planning, and the Stretch-Out IRA Strategy is the way to accomplish it Meet Mike and Mary Mike is age 65, Mary is age 63. Their current estate value is $7 million. They are both recently retired. The value of Mike s IRA is $1.5 million. Mike and Mary have enough assets outside of their IRA to enable them to live comfortably in retirement. Their goal is to use their IRA assets to create a meaningful legacy to pass on to their loved ones.. With the Stretch-Out IRA Strategy Your Client Can: Leave a legacy for their beneficiaries in the form of a stream of lifetime income Provide a source of liquid assets their beneficiaries can use to pay applicable federal estate and/or income tax due on the IRA assets Avoid having to liquidate the IRA assets to pay estate taxes Preserve the IRA assets and their tax-deferred status for their beneficiaries Have a similar case? Give us a call to discuss details

4 Page 4 Annuity Max Using Your Clients Annuity To Purchase Life Insurance - 4 Reasons Why It Makes Sense! Over the years, many Americans have purchased deferred annuities to help them with their retirement savings. A few of the reasons why annuities have been such a popular form of retirement savings is their ability to offer tax-deferred growth and guaranteed income for life. The owner of an annuity is not required to take annual withdrawals once reaching a certain age, unlike with an IRA and other types of qualified retirement accounts. Therefore, those who are fortunate enough not to need their annuity during retirement may simply choose to let the annuity grow tax-deferred, with the eventual goal of passing the entire amount to their loved ones. While that might sound like a good idea initially, in reality a tax-deferred annuity can be a potentially troubling asset to own from a tax perspective. The good news is that with the right strategy your clients can use annuity assets to pass on an even greater legacy to loved ones. Reason 1 - Double Taxation of your Annuity Assets Under current tax law, an annuity is subject to estate taxes upon death of the owner. In addition to the estate taxes on the annuity, the beneficiaries will have to pay federal income taxes on any earnings from the annuity when they are paid out. Because of this potential double taxation, an annuity is not the most taxefficient way to pass on wealth. Reason 2 - Provide Loved Ones with a More Tax-Efficient Inheritance Life insurance will provide your loved ones with a federal income tax-free death benefit, unlike the annuity that is subject to ordinary income taxation and estate taxes. Reason 3 - Lessen Your Estate Taxes Taking withdrawals from your annuity to purchase life insurance can lower potential estate taxes in two ways. It can reduce the amount of estate taxes due as a result of lowering your annuity cash value. Secondly, with the proper planning clients can position the life insurance policy so that it will not be subject to estate taxes. Reason 4 - Maximize Assets to Create an Even Greater Legacy for Loved Ones Annuity withdrawals, although subject to income tax, give clients the ability to purchase a significant amount of death benefit coverage with dollars that will not be subject to estate tax. With this strategy and life insurance, your clients annuity can be used to provide loved ones with a meaningful legacy for just pennies on the dollar. Develop a Client Profile - Who are good prospects? How do you determine who are good prospects for Wealth Transfer? Here is a list of ideas that may help you identify which of your clients may fit this profile. It is important to note that your best clients are your current clients! Who do you know, who Is fun and easy to work with? Has a very high trust relationship with you. Age 60 or over and readily accepts your advice Has children, grandchildren and/or charities that they care about and want to leave money. Has $400,000 or more in IRA or qualified plan that they do not need for income and they don t expect to need in the future. Has $200,000 or more in a deferred annuity that they do not need for income and they don t expect to need in the future. Has $100,000 or more in a CD, Money Market or Mutual fund that they do not need for income and they don t expect to need in the future. Is taking now or will soon have to take Required Minimum Distributions and does not need the income.

5 Page 5 CD vs. Linked Benefit Product Case Study The Client Richard, 60 years old, married, maintains his health. He has $100,000 in a CD, currently up for renewal. The Client s Concerns Understands the need for long term care but hesitant to commit to paying for a product he may never need Is interested in leaving money he does not use to loved ones Is concerned that the cost of his long term care will be more than he has saved Wants reassurance that he can change his mind about the product and get his money back The Strategy Reposition the money from his CD to purchase a Linked Benefit Product (LBP) LBP offers him three advantages: Long term care coverage, more than 6x his initial premium, if needed Universal life insurance death benefit, more than 2x his initial premium, for loved ones if he never needs long term care Money-back guarantee so if Richard changes his mind within the first 15 years he ll receive his initial premium back* If Richard needs care for a period of time, LBP will give him greater value for his initial $100,000 compared to a CD The Results Richard repositions the $100,000 from his CD to a LBP. He now has available: $656,940 to pay for covered long term care (LTC), if needed $218,980 death benefit amount, if he doesn t need LTC $21,898 minimum death benefit even if he uses all the available funds for LTC $100,000 minimum surrender value if he changes his mind within 15 years Withdrawing Money from a CD to Cover LTC Expenses (yielding growth of 1.5% annual interest) Using LBP to Pay for Covered LTC Expenses Result CD: Original Balance $100,000 Remaining Balance $0 CD funds to pay for LTC expenses are depleted a er 16 months. Richard would need to use other assets to pay for care. Result LBP: Original Death Benefit $218,980 Remaining Death Benefit $31,005 Richard has more than 6 mes his ini al premium when care begins. He can afford coverage for the en re period and

6 6508 Baum Drive Knoxville, TN (865) Nashville Office (615) RETURN SERVICE REQUESTED Company News: Kathryn Kinnane has rejoined TBA as a Marketing Representative. In her new role, Kathryn will be responsible for working with banks, credit unions & CPA s. Need help with Long Term Care? TBA has partnered with LTCI Partners to offer you the best companies and products available along with a very knowledgeable staff to help you make the sale. Contact them at (877) for more details. Looking for the best annuity rates around? Check with our TBA Annuity Department. Give them a call at (888) or them at annuities@tba.com. Banner Life will now be called Legal and General America. They are the 9th largest insurance company in the world. West Coast Life will now be called Protective Life and they are based out of Birmingham, AL. LTC riders are available on many of our UL products. They are very popular with John Hancock, Nationwide, Protective and NACOLAH. John Hancock has introduced a new Indexed Universal Life plan. Lincoln Financial s LifeReserve IUL offers the 1-Year Point-to-Point Indexed Account option. Clients get death benefit protection plus cash growth potential with a guaranteed 1% minimum interest rate and a 13% cap Get your 2012 sales off to a good start. Contact us about our policy review kit. Don t forget to like our Facebook page! To ensure that you always have the most current forms and applications, give us a call or download them from our website under Carrier Forms. John Hancock no longer requires MD exams for individuals over the age of 16. Family history of cancer will not prevent your client from getting a preferred best rating with ING. Contact Heather at htoliver@tba.com for a free Estate Planning Failures poster. Genworth, Protective, and Transamerica are now offering TermUL products...permanent plans with term like premiums for the initial policy years. Have a client over age 40 that is uninsurable? We can help! Presidential Life s graded whole life death benefit is fully guaranteed provided your client isn t in a nursing home. Give Jennifer a call for a quote. Nationwide is our only carrier with an indemnity-based LTC rider. Once your client qualifies for the benefit, they will receive a check.no need to file claims or keep up with receipts. Carriers that use Age Last Birthday - American National, American Memorial, Fidelity Life, Lincoln Benefit, Prudential and Omaha.