Life Insurance and LTC Funding

More and more the SPIA is being used to fund the premiums on life and LTC policies.  Funds in an SPDA can be exchanged to an SPIA and life insurance purchased to offset taxes on the built up gains.

I suggest that all agents become familiar with SPIA’s and their possible uses.  The key element is that all aspects carry the magic word “guarantee”.  For conservative clients with income needs, a guarantee may be exactly what is desired.  An income which can’t be outlived.  By shopping many carriers agents can get their clients the best deals available.

Using Immediate Annuities to fund Life Insurance:
Life and Annuity Sale - Two Sales Are Better Than One

We recently had the opportunity to assist a broker in a $100,000 indexed annuity presentation. In speaking with the clients, I learned that the couple, in their early 60's, had a $1 million IRA.

In addition to the indexed annuity sale, the broker was also presenting a $200,000 face 2nd-to-die policy. I asked the clients, who had a lot of other assets, why $200,000? They answered that the premium for a $1 million policy was too much.

I went on to ask about the IRA and they told me their intention was to leave it to the kids. I suggested using $200,000 of the IRA to buy a 7-year period certain immediate annuity to fund a 7-pay 2nd-to-die life insurance policy.

If they had died with the $200,00 still in their IRA it would only be worth about $50,000 to the children because of income tax and then estate tax. By moving it to an immediate annuity to fund a $1 million life policy we converted $50,000 after tax to $1 million.

It is becoming common to use highly taxable IRA money to fund life insurance policies via immediate annuities. And, by the way, you make two sales instead of one.


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