The Foreign National Opportunity

Transcription

1 The Foreign National Opportunity Michael Sapyta, CFP, CLU - VP, Advanced Planning Austin Jarvis, J.D., MBA - VP, Advanced Planning Attorney 1 For Financial Professional Use Only.

2 Agenda WHO IS A FOREIGN NATIONAL THE OPPORTUNITY THE PROCESS SALES IDEA CASE STUDY

3 Who is a Foreign National? Depends on who you ask Generally a Foreign National: No Green Card No Substantial Presence Does live, work, invest and do business in the U.S.

4 Who is a Foreign National? U.S. Citizen: An individual born in the States, or territories. A Foreign-born child, residing in the U.S. with at least one of their parents being a U.S. Citizen. U.S. Resident Alien: Is a foreign person who permanently resides in the U.S., but does not have citizenship (Green Card) Foreign National / Non-Resident Alien (NRA): A non-u.s. Citizen, or Foreign National, who does not posses a Green Card or pass the substantial presence test. The substantial presence test is met by residing in the U.S. for more than 31-days in the current year, and residing in the U.S. for more than 183 days over a three year period.

5 The Foreign National Market The largest and fastest growing market segment for life insurance planning Clients tend to be high net-worth Understand and desire insurance protection Particularly US Product! They Need You!

6 The Foreign National Market Uncover opportunities by working through your centers of influence (COIs) Bankers Attorneys (immigration attorneys) CPAs P&C Agents Realtors

7 The Foreign National Market Ask probing questions, such as: Do you own property or assets in other countries? Do you have plans to live/retire abroad? Is your spouse a US citizen? Are you aware that some of your assets may be subject to a 40% tax rate when transferred? What are your largest threats to wealth?

8 Life Insurance Planning + Foreign Nationals THE OPPORTUNITY For Internal Use Only.

9 The Opportunity Global wealth is shifting away from the State In fact, there are now more High Net Worth₁ clients in the Asia-Pacific market than the U.S. ₁ Having more than 1 million USD in assets

10 The Opportunity However, they want access to the US market and the US financial system Investment Opportunities Currency stability Highly regulated financial system Concerns about economical and political risk in their home country

11 The Opportunity However, they want access to the US market and the US financial system Insurance market Competitive pricing Privacy High Capacity USD denominated benefit / stable currency Asset diversification

12 The Opportunity Taxes? Foreign Nationals are treated differently: No Unlimited marital deduction $60,000 US Estate Tax Exemption If Resident Alien US Estate Tax on Worldwide Assets Gifting rules differ

13 GENERAL OVERVIEW OF ESTATE & GIFT SITUS RULES Type of Tax U.S. Citizen U.S. Resident Foreign National (NRA) Gift Tax Worldwide gifts subject to U.S. gift tax Worldwide gifts subject to U.S. gift tax Gifts of real & tangible personal U.S. situs property subject to U.S. gift tax Gifts of intangible U.S. situs property (i.e.: stocks, certain deposits, life insurance) and gifts of non-u.s. situs property not subject to U.S. gift tax Estate Tax Worldwide property owned by decedent subject to U.S. estate tax Worldwide property owned by decedent subject to U.S. estate tax U.S. situs property owned by decedent subject to U.S. estate tax

14 Insurance Planning with Foreign National Clients THE PROCESS For Internal Use Only.

15 The Process Nexus Nexus Nexus

16 The Process 1. How much time does the client spend in the States? 2. What do they do when here? 3. Financial connection? Some carriers are relaxing their guidelines towards a if it walks like a duck and quacks like a duck standard.

17 The Process Doing your homework on the front end, with regard to nexus is critical to ensure that you re positioning the case for success Work closely with your underwriting advocates to prequalify your cases and confirm that the country of residence is an approved jurisdiction by the carrier

18 The Process Timing is everything! The entire application process must be completed in the U.S. Schedule the exam and application appointments well in advance Establish a POA plan in case the client leaves the U.S. prior to policy delivery

19 The Process Agent Explain the process and set expectations ALL Application paperwork: Double-Check Make photo copies Get the illustration signed POA Notarize Make a plan to follow-up Pull a W-8BEN Write a good cover letter Carrier specific requirements Client Passport - Visa 6 months of Bank & Brokerage Statements Trust and/or Business Documentation Document Net Worth & Income *Prepare for medical exam while in the states *Limited expectations exists

20 The International Client What if there is no nexus to the U.S. and/or no USD? We Can Help! Manulife Bermuda Pan-American Life Sun Life Bermuda

21 The International Client International product tends to... Cost more than domestic U.S. contracts Fixed product Single Pay Design However that is starting to change

22 The International Client Manulife provides Indexed Universal Life, and multi-pay designs Paying premium over multiple years is new to the international client and COIs

23 The International Client Case Study: Male 49, married with 2-children, successful business owner and resident of Taiwan His Need: $10 Million USD life insurance coverage for income replacement + Savings (children's educations and/or Retirement Funds) and has budgeted $300,000 a year for these needs

24 The International Client Initial Design: $10 Million Fixed UL at $324,219 for 10-Years This is outside of the clients budget

25 The International Client Alternative Design to win the business: Using Manulife s MGIUL & E-POP (Premium Option Plus) $210,715/year for 10 years, solving for $1 CSV at 5.39% Locked-in the desired coverage and freed up $892,850 over ten years to save and invest

26 Concentrated Stock Position SALES IDEA For Internal Use Only.

27 U.S. Stock and FNs Who: HNW Foreign National What: Concentrated Stock When: Now Where: Everywhere

28 U.S. Stock and FNs U.S. Stock is intangible personal property Gift Tax Treatment? None! Estate Tax Treatment? Included in taxable estate

29 U.S. Stock and FNs Dividends are generally taxable Dividends on Sub-Account funds are not taxable U.S. Stock included in a Foreign Nationals U.S. Estate U.S. Life Insurance proceeds are generally NOT included in a Foreign Nationals U.S. Estate For a Foreign National, upon the sale of a concentrated stock position, any gain is generally EXEMPT from U.S. Income Taxation Does anyone have an idea on where and how to better leverage these assets with a Foreign National?

30 U.S. Stock and FNs Case Study: Male 62 and Female 59 Own 20,000 shares of AAPL Stock at $ Acquired 10 Years ago at $13.70 Recommendation: Reposition 50% of their stock to Life Insurance Capital Gains Tax Rate: 0%

31 U.S. Stock and FNs $1,744,900 Value of 10,000 Shares at $ $1,744,900 Reposition amount net of capital gains tax to Life Insurance $ = Per share value needed to equal insurance 381.2% = Life Insurance Death Benefit Leverage $8,397,041 Life Insurance Death Benefit Protection

32 Foreign National Client CASE STUDY For Internal Use Only.

33 Case Study Fact Pattern: U.S. Investment Advisor working with a young global citizen living and working in the States Keys to the Sale: Asking questions + Sound Advice

34 Case Study The advisor asked probing questions and learns that the clients father has $5 million in U.S. Stock, and the value is aligned with the U.S. Estate Tax Exemption so as to avoid exposure to the 40% tax rate. Is this good planning? What do you think? Of course not!

35 Case Study The clients family thought they were being prudent with their planning. The advisor shared with them the $60,000 exemption for NRAs opening the door for planning

36 Case Study Chinese Citizen Male 50 Travels to U.S. 3 times a year to visit family, who are U.S. citizens Global Net Worth of $50,000,000 $5,000,000 U.S. situs assets $45,000,000 outside the U.S. Applying for $10,000,000 of Permanent L.I.

37 Case Study Results: Client applied for and qualified for $10 million of coverage at Preferred Rates Cost and Benefit: $303,824 over 10 Years $10,000,000 Guaranteed UL Unlike the U.S. Stock, the policy is NOT counted as a U.S. situs asset, and therefore NOT subject to U.S. Estate Taxes

38 Questions? THANK YOU!