In my September 2022 article, Advanced life insurance market could soon retreat, Trust & Estatediscussed why paradigm shifts around the need for estate taxes and liquidity planning are causing some life insurance professionals to re-evaluate their sales processes and marketing approaches. Based on what I’ve seen, I’m now trying to double down on that concept.
Here’s why: We found that his federal estate tax exemption amount for 2023 will increase from $12.06 million to $12.92 million. The couple will get her $26 million deduction in line with her 2023. This increase alone continues to undercut individuals looking to pay property taxes and life insurance.
But wait a minute. Wouldn’t that exemption be cut back to 2026, when the tax law “sunsets”? Technically, yes. But the premise of that paradigm shift I mentioned is that more and more wealthy individuals will think there is no sunset.
More than just taxes
There is more to this story. Clients and prospects are regularly told to expect slowing funding growth for at least the next few years. Is not … Is this what drives wealthy individuals to donate money, even though gift tax costs are low? Or is this the backdrop for them to value their money and keep their options open for what might be on the horizon? So do many of our clients and prospects.
Life insurance professionals need not be hindered by this paradigm shift. Part of that change will be tactical in the sense that it responds to newly expressed client concerns in a timely manner. Other steps become more strategic. Consider both.
Responding to Concerned Customers
If you are a life insurance professional and want to educate your clients and prospects about the need, not to mention the prudence of carrying out estate tax and liquidity planning that could impair your personal control over your assets and cash flow. Let’s assume you’re starting to get a backlash from In fact, their comments and questions are increasingly about how to strengthen their positions and defenses against what they perceive to be difficult times ahead. Let’s call these individuals “interested clients”.
How do you respond? Some of your businesses counter with well-worn talk tracks about the economic and political cycles that “smart” individuals simply ignore when pushing through plans and, of course, buying life insurance. my advice? don’t go there It will be unnecessarily contentious and unproductive for your relationship.
What you do instead is: In the article cited, I suggested several areas of life insurance planning. This allows us to show concerned clients that we have a skilled and empathetic advisor who brings a wide range of solutions to a wide range of concerns.
- Address life insurance that is no longer needed, unwanted or unsupportable at a reasonable cost – This should be a topic of conversation and jaw-dropping among interested clients. You should be able to explore and present the full range of policy options. This means more than just bringing in a life insurance settlement expert or company. This could be, for example, working with the client’s other advisors to determine whether selling net of taxes and fees makes more sense than supporting a policy up to a specified life expectancy at the lowest feasible spend. means to analyze. Of course, this analysis has different elements depending on whether the policy is privately owned or in an irrevocable life trust. This is a real added value for interested clients and a great way to network with other advisors. If you can’t adjust this analysis, now is the time to learn.
- donate the policy to charity – This option of the policy obviously has a different set of optics than cash generating sales. However, this fits well with policyholders’ views of what constitutes the ‘right thing to do’ for assets they no longer want, need, or are unwilling to support. Optional. There’s a lot more to charitable giving through life insurance than meets the eye. For one thing, the tax side of the deal presents some interesting questions these days. Moreover, the process may contain elements of political intrigue. And of course, there is a full range of planning issues and opportunities related to many charitable giving, the selection and design of which provide excellent opportunities for networking with other advisors and the charities themselves. , that you need to understand this process and be able to guide your clients.
- Give me a tired poor split dollar deal – Here are the topics that have been covered to within an inch of their lives, or at least should have been covered by now. See my article on this topic. As the paradigm continues to shift, clients dealing with unsustainable split-dollar arrangements housing untenable policies will only find the situation much more intolerable. If you can’t work with to minimize the problem, now’s the time to learn. By the way, these welfare programs and even philanthropic strategies may have played a role in that collaboration.
- Stress test your sales process for weaknesses in case you miss the tax tailwind. We talked about this in our article on developed markets, but now it feels more urgent. If the sales process does not intuitively cover the non-tax needs of life insurance, and equally intuitively engages the client’s estate advisors other than his planners, in the coming months or years You will suffer a great loss.
- Bring marketing, especially networking, into the store and tune it up – this is also covered in the article talking about diversifying your base of influence centers. The centers of influence you have traditionally relied on for referrals may weaken in the coming days. will become necessary. This article suggests some criteria.I will also refer to My article on what investment advisors should look for when establishing a relationship with life insurance.
My closing message is very simple. It is time for life insurance professionals in the real estate liquidity market to do what they have always advised their clients to do: evaluate carefully and act accordingly.