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Annuity Funded Life

owR O PINION , Inc. Annuity Funded Life. Helping Your Clients with Life Insurance & Annuities. Sponsored by Travelers Life and Annuity. What We’ll Cover. Issues Faced by Clients with Existing Deferred Annuities Materials to help Support your sale. What About Life & Annuities.

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Annuity Funded Life

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  1. owR OPINION, Inc. Annuity Funded Life Helping Your Clients with Life Insurance & Annuities Sponsored by Travelers Life and Annuity

  2. What We’ll Cover • Issues Faced by Clients with Existing Deferred Annuities • Materials to help Support your sale

  3. What About Life & Annuities • Annuities • Useful for retirement planning • Offer tax deferred growth • Wide range of distribution options • Life Insurance • Premiums purchase death benefit • Risk borne by life insurance company In some client situations can these can be used together?

  4. Accumulation The Life of an Annuity For most annuity owners, this is how they have treated their annuity.

  5. Accumulation Distribution But there is a whole other side to Annuities

  6. Why Do the Numbers Work The Way They Do? • Erosion can be steep • But it’s never equal to the tax rates - WHY? • Income with Respect to a Decedent -IRD • Assets where growth was deferred - FACES • Estate tax • Income tax • Heirs receive an itemized deduction

  7. One of Many Tools Available • Step by Step IRD Calculator • Travelers Life & Annuity Producer Website

  8. Basic Result with No Planning • Only a few key items needed • Here tax rates were • 50% estate • 40% income • Why not 90% loss • Result is 65% loss

  9. How Did we Get There? • Under the IRD Calculation • Estate taxes first • Income tax next • Result from combined taxes

  10. Let’s See Some Client Numbers • Hypothetical situation • 67 Year old client • $500,000 annuity growing at 5% year • Client’s estate tax bracket – 45% • Heir’s income tax bracket – 31% • Federal & state • Can Planning help the client’s heirs?

  11. How Did These Numbers Work? Without Planning Each Year’s Annuity Growth Eroded by Taxes Heirs Often Disappointed ** Each year’s annuity year end balance reduced by estate and income taxes.

  12. How Did These Numbers Work? With Planning What Heirs Receive After-Tax Amounts are Gifted to Trusts Each Year Enough is Withdrawn to Pay Premiums * Annuity withdrawals are shown on a last in first out basis. Once gain is recovered, the annuity owner can withdraw basis.

  13. Year By Year Numbers –25 Year Graph

  14. What is Your Result • You have made a client happy • Shown the benefit of planning with their annuities • Shown how life insurance can be used as an asset replacement tool • Heirs are happy

  15. Issue for those Not Planning to Tap Annuities • The Double Tax Issue • Estate taxes - client • Income taxes – heirs • Erosion at top income brackets in the 70% range Based on a $1,000,000 annuity with a $350,000 basis. Client estate tax rate is 50% and heir’s income tax rate is 40%.

  16. Your Clients Have a Choice • The Annuity is going to face income tax one way or another • In your clients hands • In their heirs hands • This becomes the planning approach • Take income today • Use after-tax amounts to reposition the asset

  17. Distributions to client Classic Case

  18. Gifts to Trust Life Insurance Proceeds to Heirs Classic Case Distributions to client

  19. Classic Case Distributions to client Gifts to Trust Any Remaining Annuity to Heirs Life Insurance Proceeds to Heirs

  20. What is Your Result • You have made a client happy • Shown the benefit of planning with their annuities • Shown how life insurance can be used as an asset replacement tool • Heirs are happy

  21. Ideal Client • Age 60 or older • Annuity(ies) not needed for retirement • Has a potential estate tax problem • Estate of $3,000,000 or above

  22. Sales Support

  23. Support from Travelers Life & Annuity • Client presentation • Client materials • Strong Advanced Sales support • Provides you with back-up on the concept

  24. Customized Client Presentations

  25. Important Disclosure from Travelers • Life insurance products are issued by The Travelers Insurance Company or The Travelers Life and Annuity Company, One Cityplace, Hartford, CT 06103 • Variable products are offered by Travelers Distribution LLC as principal underwriter. • Investments in variable life insurance are subject to market risk, including loss of principal. • IMPORTANT NOTICE: The foregoing discussion involves complex tax and legal issues. This discussion is not a legal opinion, it is only meant to provide guidance. The decision whether or not to implement these ideas rests with the client’s tax and legal counsel. • Neither Travelers Life & Annuity nor its representative are authorized to offer tax advice. Clients must consult with their own independent advisors.

  26. What’s Next? • Review your book of business • Identify potential clients • Call your owR Marketing Representative to find out about support materials for this concept.

  27. If You Can Sell…We Can Help

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