Are You 48 Years Old, or Older?

If so, here’s a little-known strategy to help your CPA help you create millions of tax-free dollars. CPAs try to maintain and improve their clients’ economic and tax health. In theory, our job is simple: we use our knowledge, and if we don’t know how to solve a particular problem, we find someone who does. Often, a CPA’s ability to help is more a matter of his experience than his knowledge.

But remember, no matter how knowledgeable or experienced, none of us know it all. Like it or not, that’s often why the use of a specific strategy, method or concept that could have helped many clients falls through the cracks.

This article is about a simple strategy that few CPAs know exist, one that I’ve used hundreds of times. Let’s introduce the strategy by starting with some basic facts, based on my experience: 70 percent of life-insurance policies are outdated. These policies, typically 10 years old or older, are not capable of performing like new policies available in the marketplace. Further, 90 percent of the time when an old policy is replaced with a new one, the client winds up with a significant increased death benefit, with no increase in out-of-pocket cash for premiums. And, every dollar of those death benefits are tax free—no income tax. No estate tax.

The following examples taken from my private client files illustrate the wealth-creating power of upgrading your life-insurance policy.

Example 1: Joe (age 82) and his wife Mary (84) had a 45-yr.-old policy on Joe with a death benefit of $396,000 and a cash-surrender value (CSV) of $355,000. Joe stopped paying premiums many years ago. My insurance consultant used the $355,000 CSV to purchase a second-to-die policy (on Joe and Mary) with a $706,000 death benefit. That’s a 78 percent increase over the original $396,000 death benefit, with no additional out-of-pocket cost.

Example 2: Larry (age 58 and single) had a 15-yr.-old policy on his life: $788,631 death benefit, $239,027 CSV. Larry paid a $9000 annual premium. This time my insurance guru traded in (tax-free) the old policy for a new policy with a $1.7 million death benefit (a 116 percent increase), while maintaining the $9000 annual premium.

Example 3: Mildred, a 71-yr.-old widow, owned a 26-yr.-old policy: $10 million death benefit, $2.9 million CSV. Mildred’s annual premium was $68,000, but because the CSV was large enough to self-carry the policy, she intended to pay no more premiums out-of-pocket, borrowing against the CSV instead. My insurance consultant pulled another rabbit out of the hat, trading Mildred’s old policy for a new one (tax-free) with a $12.7 million death benefit and no additional premium payments by Mildred.

How can you join the tax-free wealth-building fun enjoyed by Joe, Larry and Mildred? Just meet the following requirements: