How To Successfully Use RMDs In Life Sales

How To Successfully Use RMDs In Life Sales

Many argue that the best Super Bowl halftime show took place in Jacksonville, FL, some years ago.  In a forum known for mediocre performances that fail to meet the hype and fulfill the expectations, the lights and fireworks opened on a band named Wings, led by one of the last vestiges of an earlier rock group whose work and music had taken a place as the centerpiece in the canon of popular music in the English-speaking world.  Paul McCartney chose to lead off with one of his creations from the Beatles’ music catalogue.  He and 80,000 spectators sang the song Baby You Can Drive My Car with its tale of a taken young man lured into a position as chauffeur for his rising-star love-interest only to have her confess at song’s end, “I got no car/ and it’s breakin’ my heart,/ but I’ve got a driver/ and that’s a start!”

And so it often is with insurance sales to be funded with a proposed insured’s unneeded RMDs coming out of their qualified plans.  It makes sense.  Use the money you must take, but don’t need, and leverage an eventual death benefit to heirs with insurance coverage.  But if you and this concept are driving a successful sale then make sure you have an insurance company that wants to be a “car-rier”.

The pill in the jam is financial justification.  The insured is 70-1/2 and, seldom, has any earned income.  Consequently, coverage can’t be justified for income replacement purposes.  And more often than not the proposed insured doesn’t have federal or state death tax concerns.

In these situations it is important to know the carriers who are sympathetic to and will underwrite reasonable amounts of coverage if other facts about the case are in order.

Consider This:

First, what percentage of the insured’s annual income is being used for premiums?  The acceptable amount could be larger in cases where it is adequately demonstrated that living expenses will be met with what remains.

Second, the amount of death benefit will usually be limited by a formula that ties the face amount to certain financial criteria.  A common example would be:  Permissible coverage = 50% of the net worth attributable to investment assets + FMV of residence – coverage in force.

Because insurance is often purchased in situations where no death tax is anticipated, clients overlook the advantages of purchasing the policy in a trust.  A living trust will keep the proceeds away from the exposure and expense of the probate court while allowing for their distribution according to a testamentary pattern not practical through a simple beneficiary designation.  An irrevocable trust will protect the proceeds from creditors as well.

Fifty-one years ago last April the Beatles had the top five single recordings on Billboard’s Hot 100 Chart.  No group or singer has every come close to such domination.  Billboard Magazine reported that during the first four months of 1964 the Fab Four accounted for 60% of all single records sold in the United States.

For similar success in your line of work – call or write to discuss those carriers who are comfortable with the “RMD-to-Life Premium” concept and ask for a marketing piece that will help generate interest and sales.