Leverage the Power of GUL for Retirement and Estate Planning

Loaded with features, a multi-faceted solution for today’s planning needs

By Rod Rishel, FSA

Mr. Rishel is Vice President and Universal Life Business Leader, American General Life Companies. He can be reached at Rod.Rishel@aglife.com.


The times are a-changin’, as Bob Dylan would say. Due in large part to the recession, many Americans are working longer into their “golden years”, have seen values in their homes and investment portfolios decrease, are supporting adult children and/or providing for the care of parents. They’re hurting and they want help to protect assets, save more and meet their retirement income needs. As financial services professionals, we can harness a powerful opportunity to help prospects and clients mend their fiscal health and develop a sound course of action to attain their retirement goals. The current economic climate and innovative products recently brought to market in light of it present some attractive potential solutions for many clients when it comes to retirement planning as well as estate planning.

Reviewing the Retirement Mindset

Let’s take a quick look back to set the stage for moving forward. As you may recall, the October issue of Life & Health Advisor reported on the 2011 SunAmerica Retirement Re-Set Study* from SunAmerica Financial Group (SAFG) and Age Wave. As part of SunAmerica Financial Group, American General Life Companies was pleased to share some helpful insights regarding how the mindset, expectations and financial planning for retirement have changed in the past decade. As a refresher, some highlights included:
The emergence of a retirement mindset re-set: 54% view retirement as a new chapter in life rather than a winding down — a significant increase over the 38% that held a similar view in 2001.
A re-setting of the timing and purpose of retirement: retirement is being postponed by five years — from 64 to 69 — due to increasing longevity as well as the recession and financial need. And nearly two-thirds of survey participants say they want to remain productive and include work in retirement.
A shift to achieving financial peace of mind as today’s number one financial goal, more so than wealth accumulation. People are six times more likely now to cite “saving enough to have financial peace of mind” as their primary goal than “accumulating as much wealth as possible”.
A focus on providing intergenerational support: nearly half of Americans 55 and older expect to provide intergenerational support for family members and 70% of those anticipate that their adult children will need financial help.

Harnessing GUL to Meet Needs

In light of the current mindset, solutions that meet clients’ financial planning needs while providing flexibility in uncertain economic times are more appealing than ever. Risk-averse clients are likely to appreciate the unique protection features of newer 100% guaranteed UL offerings that have emerged in response to the evolving market. Look for GUL products that feature:
A guaranteed death benefit and guaranteed premiums, which together provide protection that can be relied upon, even during changing economic conditions
The ability to reduce the death benefit and premiums in future years in response to changing needs and tax environments, without losing guarantees, and
A no-cost, return-of-premium feature that allows the potential for a return of up to 100% of premiums paid.

Other useful features of selected 100% guaranteed UL products include:

A shift to achieving financial peace of mind as today’s number one financial goal, more so than wealth accumulation.

Second-to-die coverage with flexible, guaranteed death benefit protection
The option for last survivor term insurance during the first four policy years for added estate flexibility and protection, and
Guaranteed cash value accumulation, which does not impact the competitiveness of premiums
Products that feature such unmatched guarantees and flexibility can be a win-win for advisors and clients alike.

Capturing an Estate Planning Opportunity

There’s another potential win-win at hand. While reviewing retirement planning options with clients and prospects, agents would be well served to also share with them an unprecedented estate planning opportunity that exists in 2012 due to a perfect storm of circumstances. The gift tax exemption (the amount that can be given away without owing a dime in federal gift tax) is the highest it has ever been: $5,120,000. The top gift tax rate, on amounts above the exemption, is the lowest it has been since 1931: 35%. However, in 2013 (absent congressional action), the exemption will drop to $1,000,000 and the top tax rate will rise to 55%.
This year, therefore, might be the only time one can pass on so much to his or her heirs and pay so little, or even nothing, in taxes. However, under the current rules, individuals have only until December 31, 2012 to give their gifts, so it behooves agents to talk with their clients and prospects promptly about including lifetime gifts as part of estate plans.
Gifting can be beneficial as part of an estate plan because the gift — and the growth on the gifted assets — are outside of the estate at estate tax time. The result: more to one’s heirs and less to Uncle Sam. Further, while life insurance is commonly used to provide liquidity to pay estate taxes at death, it can also be used to equalize inheritances when illiquid assets (for example, real estate holdings or a business) are gifted. The result: even more to one’s heirs.
Some of the most attractive solutions for taking advantage of the current estate planning opportunity center on the utilization of permanent life insurance products, particularly GUL, for those most likely to see the benefits of this estate tax reduction strategy, These include clients or prospects with assets in excess of $1,000,000 that they can afford to give to the next generation now. Savvy agents will seize the moment to get in front of their clients with this information quickly, while there is still time to capitalize on the opportunity.
When as financial services professionals, we respond to opportunities and needs with innovative solutions, including for estate planning and retirement planning, we truly live up to our titles. Americans today are looking to financial services professionals for sound guidance and are seeking the benefits that products such as 100% guaranteed UL can offer.

* The 2011 SunAmerica Retirement Re-Set Study (www.retirementreset.com)is a public opinion poll conducted by Harris Interactive in conjunction with Age Wave in the second quarter of 2011 with a national sample of 1,001 adults age 55 and older who were representative of the general population by income, ethnicity, geography and gender.