FAMILY BUSINESS SUCCESSION PLANNING – SIGNATURE GUARANTEED UNIVERSAL LIFE INSURANCE

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It can take years for you to build your business, risking everything every day. Your business can be your greatest accomplishment and you have worked hard to make it what it is today. You feel you are the business and the business is you; your self- worth is tied up in that business. The last thing you want is to see it all lost if something happens to you. Family Business Succession Planning can help ensure your business continues in the case of potential risks including:
LOSS IF SOMETHING HAPPENS TO YOU – ESTATE LIQUIDITY
If you are waiting until your death to transfer your business to the next generation, you will need some way of paying for the transaction whether there is estate tax or not. Failure to plan may result in the liquidation of the business in order to pay estate taxes and expenses. If an estate representative is forced to liquidate the business in order to pay estate taxes nine months after the date of death, the price they can obtain will be dramatically impacted not only by the speed with which the business must be liquidated but also because no planning was done to create a market for the business. The sale of the business becomes a fire sale which reflects in the price that can be obtained.
Proper life insurance planning can alleviate the need to sell the business and if the business is to be sold, a market can be created and a fair price obtained. If there is estate tax, life insurance can be used to pay the taxes and related expenses. Typically, an irrevocable life insurance trust is used to hold the policy and keep the death benefit out of the owner’s estate. That way the beneficiaries can receive the proceeds estate and income tax free.
If there is not an estate tax, there are still estate expenses for lawyers and accountants, burial expenses, and loss of revenue due to the owner no longer being a part of the company.
There may be issues with suppliers, creditors, and customers without the key owner in place. Insurance can be a way to calm these various groups so they know the company has the funds to sustain a drop in revenue while the owner is replaced with a family member or key executive.
BUY-SELL AGREEMENT
It may be hard to imagine ever losing a business you worked hard to create, but the fact is someday someone else will own your business. A properly designed Buy-Sell Agreement and estate plan ensures your business passes as you wish. Even though your intent may be to simply leave the business to family members, care should be taken to ensure that non-participating family members who do not work in the business do not receive stock in the company but instead receive other property or a buyout. A Buy-Sell Agreement can help alleviate family disputes that may arise while trying to readjust the business after something has happened to you. With the proper plan in place, the family will have the guidance they need during this critical transition period.
A stock redemption buy-sell where insurance is owned by the company allows the company to buy stock from the estate while a cross purchase buy-sell would have the children working in the business owning the insurance, and the children in the business purchasing the stock from the estate or from the children not in the business. A cross purchase buy-sell is more expensive as the cost of insurance must be grossed up for the income taxes the children must pay but the advantage is the children in the business receive a step-up in basis on their stock. The stock redemption plan has the insurance owned by the company and once the company purchases the deceased owner’s stock the stock is retired and becomes Treasury stock. The remaining owners then own all of the outstanding stock in the company with no step-up in basis.
ESTATE EQUALIZATION
As mentioned under the Buy-Sell Agreement there may be times when family members that have not been involved in the business receive partial ownership of the business. When there are multiple family members with different levels of involvement in the business, it is often times difficult to determine how the assets of the family business should be divided. Life insurance can help ensure that once the owner dies, the business will have the cash flow to continue as planned. The proceeds of the life insurance can be used to purchase the non-involved family member’s interest in the business, so that the family members that have been involved in the business can continue to run the family business as planned.

KEY PERSON INSURANCE
So many family businesses have non-family members in very key roles without whom the business may suffer. It could be the key salesman who has all of the customer contacts, the individual who has all of the relationships with suppliers, the key financial person in the company or the individual who keeps all of the machinery running out in the shop. If that person dies suddenly, the business will suffer a financial hardship due to that employee’s absence. A key person policy can help to ensure any loss is covered and additional funds are available to hire consultants temporarily until a new employee can be found and trained. It can also include a component that can provide a benefit to the deceased employee’s family.
NON-QUALIFIED DEFERRED COMPENSATION (NQDC)
Normally, on a life insurance policy that does not generate significant cash value, we would not recommend it be used for NQDC. However, the Signature Guaranteed Universal Life Insurance Policy offers the Cash-Out Rider. This allows the company to provide the employee’s family guaranteed death benefit protection at lower prices than the typical universal life policy while retaining the Cash-Out option which can pay a partial return of premiums after 15 years and a full return of premiums after 20 and 25 years, subject to the death benefit cap1. That way, the employee’s family is provided death benefit protection and then, if it is not needed after 20 or 25 years, the company may surrender the policy for its Cash-out value and use that to provide the employee an additional cash bonus.
CONCLUSION
Family Business Succession Planning is very different than planning for a closely held business that is
not family held. Each family is different and has a different set of “family” issues to plan for. The one commonality is that liquidity will be needed to convey the family business to the next generation while ensuring the continuation of the family business and being fair to children who do not participate in the business. Signature Guaranteed UL can provide a low cost means of providing permanent insurance coverage that will be there when it is needed. If the business is sold, the insured can utilize the Cash-Out option during the 15th, 20th, and 25th policy years to obtain the return of premiums while having enjoyed the permanent protection of insurance for all of those years.

Please click the link below if you wish to get more information:

http://myretirementsaving.com/

 

Your clients deserve the highest underwriting rating possible.

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The new Table Reduction program for Signature GUL could transform your case from Table 4 down to Table 3, Table 2, or even Standard!

Signature GUL Table Reduction Program:

What is the extra advantage for Signature GUL? Eagle Advantage for SGUL gives clients that normally would have been rated up to Table 4 a better rating if the lower rating was due to certain eligible conditions. A list of conditions that may be eligible for a table reduction is available to the right.
How does it work? There is no action required on the part of the agent. American National Underwriters will automatically submit your case if it appears it may qualify. If a better rating is offered, it could be a one rate class improvement or possibly better. For cases that would normally be Table 2-4, standard is the the best possible rate class.
If for some reason an improvement cannot be made, there is no chance of losing American National’s original rate class opinion.
What cases may be eligible? ELIGIBILITY:
• Signature GUL cases only
• Ages 18 – 70
• Face Amounts of $250,001 up to $2,000,000

 

Eligible Medical conditions and Non-medical risks:

  • Rheumatoid Arthritis
  •  Type II Diabetes
  •  Hepatitis B
  •  Hepatitis C (Treated)
  •  Asthma
  •  Epilepsy
  •  Abnormal EKG
  •  Blood Pressure
  •  Build
  •  Morbid Obesity Surgery
  •  Sleep Apnea
  •  Underweight

Labs:

  •  Abnormal Blood Sugars
  •  CDT
  •  Triglycerides
  •  Liver function tests
  •  Cholesterol/hdl
  •  Proteinuria
  •  Protein/Creatinine Ratio
  •  Creatinine
  •  PSA(Prostate Specific Antigen)

Non-Medical Risks:

  • Occupation
  • Scuba diving
  • Motor Vehicle Violations
  • Foreign Travel

 

 

 

 

 

 

 

 

 

 

For Agent Use Only, Not For Distribution Or Use with Consumers.

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Signature Guaranteed Universal Life Insurance (The Difference is in the Cash-Out Rider)

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Sarah and Shane were in their early 50’s, and Shane had recently received a promotion. Shane had been increasing his group term at work but felt he also needed to provide permanent protection for his family in addition to group term. Shane was looking for the most cost efficient way to provide permanent protection for his family.
Shane and Sarah had talked about their desire to put their three children through college without loans that would follow them around all of their lives. They also talked about the need to contribute the maximum to Shane’s 401k in order to have a chance at a decent retirement. It was also important to Shane to ensure that if something happened to him and he died prematurely, Sarah would not have to move out of the family home and that she would have sufficient funds for her retirement as well as the children’s college. Sarah had always worked part time but had spent the majority of her time being home with the children.
Shane and Sarah met with Hal, their Insurance Advisor, and asked what he thought may be their best option. Given how much life insurance coverage Sarah and Shane said they needed along with how much they had to spend, Hal showed them Signature Guaranteed Universal Life (SGUL) policy with the Guaranteed Cash-Out Rider with a $500,000 face amount. Hal advised that their SGUL policy was dialable and would allow them to select the guaranteed coverage that worked best for them. Since Sarah and Shane did not expect to live past 100, they selected age 100 as the guarantee length for their death benefit.
Hal also talked to Sarah and Shane about Guaranteed Cash-Out Rider. Hal indicated that the Signature Guaranteed Universal Life policy would meet their current needs but reminded them that those needs may change as their situation changed. For example, someday, their house would be paid off, their kids would be educated and living on their own or with their own families, and they would be in retirement.
Hal indicated that with the Guaranteed Cash-Out Rider they would have the ability at the 15th, 20th, and 25th policy anniversary to Cash-out their policy and receive either a partial or full return of their premiums.1 That way, if they no longer needed the insurance coverage they could receive a return of their premiums.2 He showed them an example in the illustration where upon their 20th anniversary they could, in this case, receive 100% of their premiums back (subject to a benefit maximum). Hal stated that each company that offered a return of premium rider had a death benefit cap on the total benefit that could be received. For their $500,000 policy, cap was the highest in the industry at 65 percent of the death benefit. In year 20, they could receive back all of their premiums paid. They would both be in their early 70’s by then and could assess at that time whether they would like to re-purpose their policy. If they chose not to cash out the policy, they could reevaluate their situation again in year 25. Hal indicated that if they cashed out their policy, there would be no taxable income as this was simply a return of after tax premiums that they had already paid.
Hal told Sarah and Shane that if they cashed out their life insurance policy they could do whatever they wanted with the money. They could add it to their existing investments, place in a deferred annuity, or even purchase an immediate annuity that would provide them additional cash flow for the remainder of their lives.
Sarah and Shane really liked the flexibility p rovided by the Signature Guaranteed Universal Life policy with the Guaranteed Cash-Out Rider. They liked the fact that they would have three different options to surrender their policy and receive back a partial or full return of premiums if they found they no longer needed the coverage. They could have peace of mind knowing their family was protected along with the additional options to get their premiums back in the event their needs change.

Hal also told them the policy, also had living benefits for Terminal, Chronic, and Critical illness that were among the best in the industry. If Shane incurred a severe illness that resulted in shortening his life expectancy considerably, he could request a partial or a full accelerated benefit and would not be restricted as to how to use the funds. The funds could be used to pay down medical bills, hire someone to help Shane, or any other needs. Both Shane and Sarah liked having that added protection, and Shane liked having benefits he could enjoy during his life such as supplemental retirement income from the Cash-Out Rider and protection from life altering medical events.
Sarah and Shane loved the security the Signature Guaranteed Universal Life offered them. The SGUL provided a Guaranteed Death Benefit, a Guaranteed Cash-Out Rider if they later needed the money, and Living Benefits in the event Shane incurred a serious illness. Sarah and Shane felt they were taking care of multiple risks with one product at a very competitive price. Hal completed an application and after everything was through Underwriting, they received their policy and felt a new level of protection from life’s unplanned events.

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For Agent Use Only; Not for Distribution or Use with Consumers.

Certainty Select® Multi-Year Guarantee Annuity

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3 Years 1.80%
5 Years 2.50%
6 Years 2.75%
8 Years 3.00%
10 Years 3.25%

Rates effective since 8/18/16.

  • Available to applicants ages 0-90
  • Nursing home waiver rider, applicant ages 0-80 (not available in MA)
  • Full Accumulation Value at Death
  • Available in 49 states Competitive Rates!

Questions? Send an email to info@dfsmarketing.net , call 855-740-3140, or visit our website DFS Marketing Inc.

California Product Changes Effective January 1, 2017

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California passed a legislative bill (Assembly Bill 2884) that places certain restrictions on fixed annuity surrender charges – resulting in some products being withdrawn from sale in California, and others offered with lower surrender charges.

Good News! Despite the new restriction, several products will be available beginning 1/1/17 with reduced surrender charges! Plus, commissions are unchanged for products offered after 1/1/17!

Questions? Send an email to info@dfsmarketing.net

call 855-740-3140 or visit our website at DFS Marketing Inc.