The right fit for that $41 trillion transfer of wealth

 By Richard Hotham, Vice President, Financial Institutions, Liberty Life Assurance Company of Boston

Our country is in the midst of the largest intergenerational transfer of wealth in history.  Researchers say nearly $41 trillion will change hands in the United States by the year 2052, as Baby Boomers pass on nest eggs to the next generation.1

While affluent Americans can easily avail themselves to sophisticated and costly estate planning counsel, they are not alone in their need for financial wisdom.  Millions of middle-class consumers are looking for direction on how  best to care for the next generation.  In fact, many of them are probably customers at your bank right now.

These senior middle-market customers need to understand just what they’re passing on to heirs, especially if they’ve placed their nest eggs in tax-deferred vehicles.  That’s because along with the windfall comes a potential pitfall: Income taxes that can take an enormous bite out of their loved ones’ inheritance.

True, many elect to purchase an annuity – and may be doing so in your bank. According to LIMRA International, 2003 annuity sales totaled $219 billion, and the majority of sales of fixed annuities took place in banks.  Two-thirds of annuities sold in banks in 2003 were non-qualified, and half of the buyers were seniors 65 and older.2

But here’s the real kicker:  More than 88% of annuities sold between 1979 and 1996 remain untouched. 3  Annuity owners are dying and passing their annuities to loved ones, along with substantial tax liabilities on the gain in the contract!  That gain is taxed at the beneficiary’s marginal tax rate, and often hits during an individual’s peak earning years…so the tax bite can be substantial.

SPWL:  The annuity alternative

For the right client, single payment whole life (SPWL) insurance is one of the most efficient wealth transfer vehicles on the market.  Here’s why:

First, it provides more money to pass along to loved ones.  Your customer’s single payment instantly becomes a much larger death benefit.  Depending on your customer’s age, it could be double the value of the single payment.

Then there’s the fact that the death benefit passes income tax-free under current tax law.  The IRS doesn’t get a penny, and named beneficiaries bypass all the costs and delays of probate.

To satisfy the needs of the conservative senior market, many SPWLs come with strong assurances:  guarantee of principal, guarantee of initial death benefit, guaranteed account values and a guaranteed interest rate that locks in annually.  The account value then grows tax-deferred.  Many SPWLs also give seniors the peace of mind that they’ll get a rate of return plus the ability to access their money if they become seriously ill, with loan and partial withdrawal features, and ways to access cash value or accelerate the death benefit.

Some SPWL carriers have even streamlined the purchase process by offering a simplified application with brief medical questions and a guaranteed ten-minute decision, making it a perfect match for the fast-paced, transaction-based environment of banks.

A candidate just walked through your door

Good candidates for single payment whole life insurance surround you.  They’re between the ages of 60 and 85 with money they don’t need for future income.  They’re generally conservative and in fairly good health.  They’re the customers who come into your bank on a regular basis, relying on you for sound financial advice.

Talk to them about the advantages of single payment whole life.  After all, we’re looking at the biggest transfer of wealth in history.  For your client, make sure it’s the best.


About Liberty Life Assurance Company of Boston

Liberty Life Assurance Company of Boston, a member of the Liberty Mutual Group, markets its life insurance and annuities through multiple distribution channels, insuring the lives and financial futures of more than 700,000 Americans.  One of its key operating principles is its ability to respond quickly and strategically to the needs of its business partners.  Liberty Life pioneered the ten-minute issue process for single payment whole life insurance in banks in 1995, and remains a leading provider of non-credit life insurance through banks today. 

1 Millionaires and the Millennium: New Estimates of the Forthcoming Wealth Transfer and the Prospects for a Golden Age of Philanthropy, Schervish, Paul G. and Havens, John J., Social Welfare Research Institute, Boston College, Boston, MA, October 1999 , www.bc.edu/bc_org/avp/gsas/swri/swri_features_wealth_transfer_report.htm
2,3  U.S. Annuity Persistency Study, LIMRA International, Inc., Hartford, CT, 2005

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