selling life insurance 6

inter vivos transfer

• is made when estate owner is still alive

• transfer can be made as

  • gifts

  • trust

  • policy ownership under rights of survivor shop

testamentary transfers

-in essence, is a transfer of life insurance policy ownership that happens through a will. This means the transfer takes effect upon the policyholder's death, and the beneficiary (or a trust named as a beneficiary) will receive the proceeds according to the terms outlined in the will. 

• if they die without leaving will (dying interstate) the property will be transferred as an interstate distribution under the laws of the state

accelerated benefits

are living benefits paid by the insurance company that reduce the remaining death benefit. The government does not consider accelerated death payments to be taxable income, and the policy owner get 50-90% of the policy full benefit. ( not taxable as income, may need a life exptectancy of one year or less) 
-, also known as "living benefits" or "accelerated death benefits," allow policyholders to receive a portion of their life insurance death benefit before they die, if they have been diagnosed with a terminal illness and are expected to die within a certain timeframe (typically six months to two years). These benefits provide financial assistance to help cover expenses like medical bills, long-term care, or other costs associated with a terminal illness. 

viatical settlement

the policy holder sell all right to the life insurance policy to a viatical settlement company, which advances a percentage(usually 60-80%) of the eventual death benefit. The viatical settlement company then receive the death benefit when the insured ultimately dies. ( not taxable as income)

buy- sell agreement( business continuation agreement)

-provides necessary cash to keep the business doors open until business can be sold as its fair market value for the benefit of the family, life insurance can also be used to provide funds for a competent employee or other qualified person to purchase the business from surviving family members.

key person life insurance

-protects the corporation from financial loss sustained when a key employee(the owner, for example) dies. In addition to the corporate owner. A key person could be a sales manager, vice president, and so forth. To offset the financial loss of losing the key person. The corporation who is the owner will purchase the insurance, the are also the premium payor as well as the beneficiary, the face amount of the policy would general relate to the loss of income from employee as well as the cost of hiring and training a replacement.

deferred compensation

• is a executive benefit that enables a highly paid corporate employee to defer current receipt of income of income such as an executive bonus and have it paid as compensation at later date( retirement, death, or disability) when presumably the employee will be in a lower tax bracket. generally, the employee will enter into a agreement with the employer that specifies the amount of money to be paid, when it will be paid , and the conditions under which the deferred compensation may not be paid.

cost associated with death

• when an individual dies, he or she typically leaves behind a certain costs, which include( doctor and hospital bills from a final illness or accident, funeral expense, estate taxes, and debts(credit cards, or loans)

• outside of just this individuals leaving being family or others who are financially depends on them for support

  • mortgage payments

  • immediate income needs- groceries, utilities , car payments and other day to day living expenses

  • long temr needs- money to pay for childrens education, spouses retirement income

Human life value approach

— concept puts a dollar value on an individual based on the earning potential of the insured, calculated and project over a period of years capitalized), taking into account four factors

• individual net annual salary

• the individuals annual expenses

• the number of years the individual has left to work ( the present to retirement age)

• the value of the individuals dollar as it depreciates over time (capitalized rate)

• (is a way of determining what a family would lose in income by death of the principal wage earner)

Needs approach

looking at the needs of an individuals and his or her dependents

• needs for last illness and burial expenses

• maintenance income for the family for a period of time after death of the principal wage earner

• education for dependents children

• continuing income for the surviving spouse and so forth

captial conservation

• income is derived only from interest gained on the principal

• it generated income indefinitely, no matter how long the survivor lives the capital conservation fund remain intact and generates interest

• it creates legacy under capital conservation, when funds are no longer need, they can be given away to loved ones or charity

capital liquidation

-the surviving spouse and family would use a portion of the life insurance proceeds, as well as the investment earnings, to cover expenses. The goal is to have the capital depleted at or shortly after the end of the surviving spouse's life expectancy, covering income needs during readjustment, dependency, blackout, and retirement. 

Estate planning

-life insurance serves as a tool to manage and distribute assets after death, ensuring financial security for beneficiaries and potentially minimizing taxes. It can provide a lump sum of cash for various needs, including covering debts, paying taxes, or replacing lost income. Life insurance can also be used to facilitate the transfer of assets, like a family business, to heirs.

consideration:

• the needs of the beneficiaries

•   the type and amount of property that is in the estate

• how to best administer the estate to fulfill the wishes of the insured

• the amount of insurance needed to cover expense and costs

• how to dispose of any business interest

• who will settle and administer the estate

• two ways to distribute estate( inter vivos and transfer, or testamentary transfer)

split dollar plan

• not life insurance policy but rather methods of purchasing life insurance,

• an arrangement where two or more parties (typically an employer and employee) share the costs, benefits, and ownership of a permanent life insurance policy. This agreement outlines how the premium, cash value, and death benefit will be divided between the parties.