Just as Paul McCartney led a memorable halftime show with a classic Beatles tune, financial advisors can orchestrate successful insurance sales by leveraging clients' unneeded Required Minimum Distributions (RMDs) from qualified retirement plans. This strategy allows clients to utilize mandatory distributions while securing insurance coverage that provides a valuable death benefit to heirs. However, like choosing the right car for a road trip, selecting the appropriate insurance carrier is crucial for a smooth journey to a successful sale.
Navigating Financial Justification: For clients in their seventies with limited earned income and minimal concerns about federal or state death taxes, financial justification for insurance coverage may seem elusive. Yet, understanding the nuances of carriers sympathetic to these scenarios can unlock opportunities for advisors.
Key Considerations:
Premium Affordability: Assess what percentage of the insured's annual income will be allocated to premiums. Carriers may be more accommodating if it's demonstrated that living expenses can be comfortably covered with the remaining funds.
Death Benefit Limitations: Carriers often impose limits on the face amount of coverage based on specific financial criteria. Understanding these formulas, such as tying coverage to a percentage of net worth or subtracting existing coverage, helps advisors tailor recommendations to clients' financial profiles.
Maximizing Benefits Through Trusts: Clients frequently overlook the advantages of purchasing insurance policies within trusts, especially in scenarios without anticipated death taxes. Whether utilizing a living trust to bypass probate or an irrevocable trust for creditor protection, incorporating trusts into insurance planning enhances the efficiency and security of wealth transfer.
Conclusion: Just as the Beatles dominated the music charts over half a century ago, financial advisors can achieve remarkable success in insurance sales by strategically leveraging clients' RMDs and aligning with carriers attuned to their unique financial situations. By emphasizing affordability, understanding death benefit limitations, and maximizing benefits through trusts, advisors can drive meaningful outcomes for clients while ensuring a smooth journey toward their financial goals