Life As An Asset Client


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Life As An Asset Client

  1. 1. LIFELife Insurance As An Asseta key component of a diversified portfolio
  2. 2. preparing forthe ifs in life. diversify. These reasons are why a cornerstone of many Life insurance is for living. successful families’ financial plans is life insurance. Wouldn’t you live better It is a flexible product that offers death benefitnow if you had more confidence protection and may also offer an opportunity to save for your own future. Evaluating all available in your ability to: financial opportunities may help you to reach your financial goals. Life insurance is one of those • Create financial protection opportunities – providing protection for today and for your family helping prepare for tomorrow. • Grow equity with which to preserve your lifestyle Please note: This document is designed to provide introductory information on the subject matter. MetLife does not provide tax and legal advice. You • Leave a legacy to the ones should consult with your attorney and /or tax advisor before making financial investment or planning decisions. you love
  3. 3. life insurance- an asset with Advantages ASSET A resource having economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit. Investopedia.comTraditionally, life insurance has been thought of as a necessary expense A note about lifeneeded to protect a family’s financial future, but it has the potential insurance distributions:to offer far more when you consider its advantages as an asset. Tax-free distributions assume that theLife insurance can: life insurance policy is properly funded, is not a Modified Endowment Contract• Leverage a limited number of premium payments into a sizable (MEC), and distributions are made up to death benefit to protect your family in the event you die the cost basis and policy loans thereafter. prematurely. Distributions may need to be reduced,• Provide access to cash value which could be utilized to supplement stopped and/ or premium payments may retirement income or help fund a child’s education. need to be resumed if the policy does• Transfer wealth created over a lifetime with an income tax free not perform as expected or to avoid a death benefit. The life insurance death benefit even has the policy lapse. Should the policy lapse or potential to be estate tax free if properly owned and structured. be surrendered prior to the death of the insured, there may be tax consequences.For these reasons, life insurance is more than just a necessaryexpense — it is an important asset to own within your portfolio.The benefits of a permanent life insurancepolicy include:• Income tax free death benefit paid to beneficiary• Tax-deferred growth of policy cash values 1 Loans and withdrawals will decrease the cash value• No contribution limits due to income and death benefit.• Potential for income tax-free withdrawals and policy loans1 2 For a MEC policy, income taxes are due upon withdrawal, and, if withdrawn before age 59½,• No 10% penalty tax on cash value distributions prior to age 59½2 a 10% Federal income tax penalty tax may apply. 1
  4. 4. consider income taxes when funding your Portfolio U.S. FEDERAL MARGINAL INCOME TAX RATESTaxes can have a Average Top Marginal Tax Rate = 59.45% 100significant impact on how 90 Average income at which top rate becomes effectivemuch of your savings you 80 $256,842 (1942-2009)ultimately get to use to PERCENTAGE OF INCOME 70enhance your lifestyle. 60 50Taxes can also have an impact on how 40much of any remaining assets arereceived by your beneficiaries. In the last 30thirty years, U.S. income taxes have been 20comparatively low. The top Marginal 10Tax Rate for the highest income earnersis currently 35%, but the average top 0 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000rate over the last one hundred years has YEARS Internal Revenue Service, Statistics of Income Bulletinbeen nearly 60%. Even though the future of income taxes is unpredictable, it would be reasonable to assume they will continue to evolve over time, experiencing high and low periods. You can help protect retirement assets from being diminished by taxes by allocating savings to assets that permit tax-free distributions. This action has the potential to enhance your retirement income because your savings will be sheltered from income tax, regardless of the rates in effect at the time you need income. 2
  5. 5. 4 assets with tax-advantages Contributions to Roth IRAs are limited to those with • Roth IRAs income below certain levels and Roth 401(k)s have very • Roth 401(k)s limited availability, only 19% of plans in 2009 offered • Municipal Bonds this option.3 For families who need life insurance’s death • Cash Value Life Insurance benefit protection, cash value policies may provide the ability to protect one’s family today as well as the potential to supplement retirement income tomorrow.4GENERAL OVERVIEW OF FEDERAL TAX FEATURES Life Qualified Plan/ Deferred Roth IRA/ Municipal Feature Insurance Traditional IRA Annuities Roth 401K Bonds Funding/Contribution Limits NO5 YES NO YES NO Potential Income YES YES YES YES TAX EXEMPT7 Tax-Deferred Accumulations Income Tax-Advantaged YES NO NO YES TAX EXEMPT7 Withdrawals/Loans Income Tax-Free Insurance YES6 N/A NO N/A N/A Death Benefit Penalty Tax for Early Withdrawal Only if MEC4 YES YES YES NO Cost of Insurance Charges8 YES NO YES NO NO The table above provides a general overview of certain Federal tax features of the listed asset options. These highlighted features do not present a complete picture of applicable Federal tax rules. Federal tax law is highly specific and depends on individual facts and circumstances. Please make sure to consult your personal tax and legal professionals in your particular situation before purchasing any financial product.3 Drinker Biddle & Reath LLP, Grant Thornton LLP and Plan Sponsor Advisors.Retirement Plan Survey, 2009.4 Distributions from a life insurance policy are loans and withdrawals. Certain withdrawals may be subject to income tax in the first fifteen years depending on criteria set forth in Internal Revenue Code 7702(f)(7)(B). After fifteen years, assuming the policy is not a Modified Endowment Contract (MEC), withdrawals up to the policy’s tax basis are not taxable. Policy loans are not taxable provided that the policy remains in force until the insured dies. Policy loans may have interest charges. Unfavorable performance of variable life insurance product subaccounts may necessitate the payment of additional premium. Should the policy lapse or be surrendered prior to the death of the insured, there may be tax consequences. Loans and withdrawals will decrease the cash value and death benefit.5 Life insurance premiums are not limited above certain income guidelines. Generally, there is not a specific limit on dollars allocated to purchase life insurance, however there are maximum premium limits determined by a specifed policy face amount according to the Internal Revenue Code. The face amount of coverage each carrier will underwrite will also differ.6 For Federal income tax purposes, life insurance death benefits generally pay income tax–free to beneficiaries. In certain situations, however, life insurance death benefits may be partially or wholly taxable. Please consult your professional tax advisor for information regarding your particular facts and circumstances.7 AMT may apply.8 Life insurance and annuities have cost of insurance charges associated with providing a death benefit that do not apply to other products. Each of the financial vehicles listed above will have various fees and charges. 3
  6. 6. taking a closer look at Cash ValueMEET JACKJack Martin is 35 and owns his own landscaping company. He If Jack does not need additional income during his retirement,has recently divorced and needs to make sure his two children he can either continue paying premiums, allowing the cashare provided for financially, should he suffer an untimely death. value and death benefit to increase, or he could allow futureHe has decided to purchase life insurance to meet this need. dividend payments to reduce his premium outlay and keep the death benefit relatively stable.Jack has always reinvested almost all of his profits back into thecompany and now he feels the need to catch up on preparing Jack really likes the flexibility of this life insurance product andfor retirement. He has a SIMPLE IRA in which he invests the moves forward with his application for the policy.allowable maximum each year and feels comfortable he hasan additional $10,000 per year that he can devote to insurancepremiums and added savings.Jack’s financial professional shows him an illustration fora MetLife Whole Life policy. Assuming Jack qualifies for a MetLife Whole Life Policy Cash Valuepreferred, non-smoker rating and pays $10,000 premium eachyear until age 100, the guaranteed death benefit on the policy Assuming Current Dividend Guaranteed Crediting Rateswould be $909,5069. The death benefit has the potential to AGE Cash Valueincrease with higher crediting rates or dividend payments that Cash Value Yieldare non-guaranteed features of the policy. 55 $214,643 $310,721 4.03% 65 $373,807 $644,438 4.56%Jack’s financial professional explains that the cash value grows 75 $543,885 $1,153,122 4.62%slowly in the early years of the policy, but can grow into a 85 $697,591 $1,879,646 4.52%significant source of funds for supplemental income by the timehe retires. Then he shows Jack what the policy’s cash value maymean to him at age 55, 65, 75 or 85 depending on his future For Illustrative Purposes Only. Please request a full product illustration fromincome needs. your financial representative for more details.Based on the policy’s non-guaranteed dividends, Jack would Assumptions: 35 year old male, preferred, non-smoker, $10,000 premium paid annually through age 100, Federal income tax rate = 35%earn slightly more than a 4% rate of return on premiums paid ifhe waits until retirement age to take any loans or withdrawals Current crediting rates and dividend scale are not guaranteed and are likely to be changed by Metropolitan Life Insurance Company over time. Your policy’sfrom the policy. However, If Jack initiated a moderate actual non-guaranteed values and benefits will be more or less favorable thansupplemental income stream from the cash value using those shown.withdrawals and loans—being careful not to lapse the policy-he may realize this income on a tax-free basis.10 A significantly 9 Guarantees are based on the claims paying ability and financial strength of the issuing company.higher rate of return would be necessary to distribute an 10 Tax-free distributions assume that the life insurance policy is properly structured,equivalent amount of income from a taxable account, due to is not a Modified Endowment Contract (MEC) and distributions are made upcapital gains or ordinary income taxes. to the cost basis and policy loans thereafter. Should the policy lapse or be sur- rendered prior to the death of the insured, there may be tax consequences. Loans and withdrawals will decrease the cash value and death benefit. 4
  7. 7. life insurance as a value added asset in your PortfolioWhile the policy’s death benefit is the primary reason forpurchasing life insurance, it is important to know that the For more informationpolicy you choose may provide more value to your family about MetLife’s lifethan just a death benefit. insurance products,Protecting income for your loved ones is valuable in please contact youritself, but permanent life insurance can easily transition toproviding supplemental retirement income should you financial professional.enjoy a long and healthy retirement.11 Finally, it cantransfer any remaining death benefit to your beneficiariesin the form of an income tax free legacy.The flexibility to help you protect, accumulate andtransfer wealth can make life insurance a significant valuewithin your portfolio. When attempting to preparefinancially for the future IFs in life, it is important toinclude assets that can change and grow with you.A diverse mix of products may better enable yourportfolio to adapt to future accumulation, protection andtransfer needs. Life insurance deserves to be consideredas an integral asset within your portfolio.why life insurance? COMMON GOALS FOR BUYING LIFE INSURANCEMany people who buy life insurance do so 100because they know it can add value to their Older Families PERCENTAGE STATED GOAL 80 Married Couplesfinancial portfolio as a means of supplementing WAS IMPORTANT Not Marrieda number of different financial goals in 60addition to providing death benefit protection. 40 20 0 Provide Financial Transfer Wealth/Pay Tax-Advantaged Pay off Debt/Cover11 Not all products provide guaranteed cash value accumulation. Security for the family Estate Taxes Savings or Investment Final Expenses Supplemental Income Investments in variable life insurance are subject to market risk including loss of principal. LIMRA, How and Why People Buy High Face Life, August 2008. 5
  8. 8. Prospectuses for Equity Advantage Variable Universal Life, and for the investment portfolios offered thereunder, are availablefrom MetLife. The policy prospectus contains information about the policy’s features, risks, charges and expenses. The investmentobjectives, risks and policies of the investment options, as well as other information about the investment options, are describedin their respective prospectuses. Clients should read the prospectuses and consider this information carefully before investing.Product availability and features may vary by state.MetLife life insurance policies have limitations, exclusions, charges, termination provisions and terms for keeping them in force. There is no guaranteethat any of the variable investment options in a variable life policy will meet their stated goals or objectives. The account value is subject to marketfluctuations so that, when withdrawn, it may be worth more or less than its original value. Guarantees are based on the claims-paying ability andfinancial strength of the issuing insurance company.Pursuant to IRS Circular 230, MetLife is providing you with the following notification: The information contained in this documentis not intended to (and cannot) be used by anyone to avoid IRS penalties. This document supports the promotion and marketingof insurance products. You should seek advice based on your particular circumstances from an independent tax advisor.MetLife, its agents, and representatives may not give legal or tax advice. Any discussion of taxes herein or related to this document is for generalinformation purposes only and does not purport to be complete or cover every situation. Tax law is subject to interpretation and legislative change.Tax results and the appropriateness of any product for any specific taxpayer may vary depending on the facts and circumstances. You should consultwith and rely on your own independent legal and tax advisors regarding your particular set of facts and circumstances.Life insurance is medically underwritten. Clients should not cancel their current coverage until their new coverage is in force. Surrender chargesmay be due on an exchange of one contract for another. A change in policy may require a medical examination. Surrenders may be taxable. Clientsshould consult their own tax advisors regarding tax liability on surrenders.Guarantee Advantage Universal Life is issued by MetLife Investors USA Insurance Company on Policy Form Series 5E-34-07 and in New York, only byMetropolitan Life Insurance Company on Policy Form Series 1E-34-07-NY. Legacy Advantage Survivorship Universal Life is issued by MetLife InvestorsUSA Insurance Company on Policy Form Series 5E-32-05 and in New York, only by Metropolitan Life Insurance Company on Policy Form Series 1E-32-05-NY. Equity Advantage Variable Universal Life is issued by MetLife Investors USA Insurance Company on Policy Form Series 5E-46-06 and in NewYork only by Metropolitan Life Insurance Company, Policy Form Series 1E-46-06-NY-1. Whole Life is issued by Metropolitan Life Insurance Companyon Policy Form Series 8-90(08). Guaranteed Level Term is issued by MetLife Investors USA Insurance Company on Policy Form Series 5E-21-04 andin New York, only by First MetLife Investors Insurance Company on Policy Form Series 5E-21-04-NY. All guarantees are based on the claims-payingability and financial strength of the issuing insurance company. All products are distributed by MetLife Investors Distribution Company (MetLifeInvestors), 5 Park Plaza, Suite 1900, Irvine, CA 92614. August 2010 Life Insurance Products: • Not A Deposit • Not FDIC-Insured • Not Insured By Any Federal Government Agency • Not Guaranteed By Any Bank Or Credit Union • May Go Down In ValueMetropolitan Life Insurance Company MetLife Investors Distribution Company200 Park Avenue 5 Park Plaza, Suite 1900, Irvine, CA 92614New York, NY 10166metlife.com1008-2630 CLVL20822© 2010 METLIFE, INC. L0810123853(0911)PEANUTS © 2010 Peanuts Worldwide