The Insured Annuity begins with the purchase of a prescribed life annuity using non-registered funds (preferable the least tax efficient investments generating interest income, like GICs). Then a payout annuity provides a level, guaranteed income for the remainder of your life.
Income is calculated by averaging the interest that would be earned over the rest of your life, combined with a level amount of capital both of which are returned to you each year. Tax is payable only on the part of the income that is interest – the net cash flow provided by the annuity is greater than other guaranteed interest investments. Upon death, the annuity payments end.
What about my estate/heirs if I die soon after getting my annuity?
The other component of an Insured Annuity is a life insurance policy. The death benefit is equal to the initial annuity deposit. The insurance premiums are paid from the tax savings and increased cash flow provided by the annuity. The proceeds are paid out on death directly to your named beneficiaries, tax-free and exempt from probate, legal and executor fees.
Insured Retirement Program Concept (IRP)
The Insured Retirement Program is a financial planning strategy that will address your dual needs for insurance and supplementary retirement income. With this financial planning strategy, deposits are made into a permanent life insurance policy. In the future, the policy is assigned to your bank as collateral for a loan. The loan is used as a retirement income supplement. When you pass away the insurance proceeds are used to pay off the outstanding loan balance and the excess proceeds are paid to the named beneficiary, tax-free.
You transfer liquid invested assets or income into universal life insurance for tax-free growth. You get tax-free income later by assigning the cash rich policy to a bank as collateral for tax-free loans. The loans are repaid with the tax-free death benefit.
This is a leveraging strategy, where you can own life insurance, use it as an investment plan to accumulate wealth, and borrow funds from the policy tax free in retirement.
One of the biggest hurdles your retirement plan must overcome is taxation. The Insured Retirement Plan utilizes the features of a tax exempt universal life insurance policy to allow you to build up a cash reserve on a tax sheltered basis and enjoy a tax preferred income stream from the plan.
Buy/Sell Agreement:
this strategy protects your business interest through funding an agreement to buy out partners or major shareholders in the event of death or long-term disability.
Irrevocable Life Insurance Trusts*
These are special trusts that can help clients exclude life insurance proceeds from their estates. A life insurance trust involves a tax reduction strategy. Generally the trust arises at the death of the grantor and is composed of insurance proceeds. Since the insurance trust owns your insurance policies for you- you don’t personally own the insurance, it will not be included in your estate and your estate taxes are reduced.
For example if you are married and have an estate of $2 million- $400,000 of which is life insurance. By creating a living trust or will, you can protect much of the estate from estate taxes. However the estate tax on the $400,000 insurance is $156,000! If you had created an insurance trust, the $400,000 in insurance would not be in your estate and you would save your family $156,000 in estate taxes.
Buy-Sell Agreements for Small Business Owners *
As more Americans become entrepreneurs, they’ve discovered that wise business planning is essential to their success today and their financial security tomorrow. Buy-Sell agreements are generally for owners of closely held corporations who want to protect their assets. The surviving owners agree to purchase the interest of a withdrawing or deceased owner. The buy sell agreement provides for an orderly disposition of an interest in a business and is beneficial in setting the value for estate tax purposes.
Charitable Remainder Trusts *
Charitable Remainder Trusts (also called CRT’s) are for people who have highly appreciated assets that they want to donate to a charity or organization they admire. At the same time they can secure a current tax break, preserve or gain a source of income, and provide their beneficiaries with a tax-free inheritance in the future.
How it works: You transfer an substantially appreciated asset into an irrevocable trust. This removes it from your estate so, when you die, no estate taxes will be due on it. The trustee can then sell the asset at full market value, without paying a capital gains tax. The trustee can then reinvest the proceeds in other income-producing assets. During the remainder of your life the trust pays you the income. At your death, the remaining trust assets go to the charity you have chosen- hence the name charitable remainder trust.
