Page 34 - MetalForming February 2010

Irv Blackman, CPA and lawyer, is a retired founding partner of Blackman Kallick Bartelstein, LLP and chairman emeritus of the New Century Bank (both in Chicago). Want to consult? Need a second opinion? Contact Irv:
Blackman, Kallick, Bartelstein 10 S. Riverside Plaza, Ste. 900 Chicago, IL 60606
phone: 847/674-5295
e-mail:
Blackman@EstateTaxSecrets.com www.taxsecretsofthewealthy.com
You’ll be delighted by what you are about to read. The real subject, courtesy of flaws in the tax law, is tax-advantaged investment strategies— the kind of stuff they don’t teach you to become a lawyer, CPA or other profes- sional advisor.
Few people know how generous the Internal Revenue Code is to life insur- ance and the industry lobby—people that know the right buttons to push to make sure the tax laws stay that way. You are about to learn some of those tax laws.
Before we get to some jaw-dropping, wealth-creation strategies, let’s run through the basic life-insurance con- cepts that turn life insurance into prof- itable investment strategies by taking advantage of the tax-law flaws.
Concept No. 1—The dollar amount you must earn to leave your kids/grand- kids $1 million—would you believe $3 million. Here’s an example of how the numbers (all rounded) are determined.
So you earn that $3 million and are in a 40 percent tax bracket (35 percent federal, plus 5 percent state). You are bludgeoned with an income-tax bill of $1.2 million. Only $1.8 million left. When you get hit by the final bus, the 45 percent estate tax robs $800,000 more... leaving your heirs that $1 million. Not a pretty tax picture.
Concept No. 2—The dollar amount you must invest in a life insurance prod- uct to leave $1 million to your kids/grandkids. Of course, your invest- ment (the amount of your premiums) varies, depending on your age and health.
Suppose you and your spouse are both 60 yr. old, and you decide to
buy a $1 million second-to-die poli- cy to be fully paid in 15 years (called “15-yr.-pay” because premiums stop after 15 yr.)
My insurance guru—a genius at finding the lowest premiums with top- rated companies—quoted $18,149 per year, making the total premium $272,235 ($18,149 x 15).
Simply put, your $272,235 invest- ment will get your heirs $1 million all tax-free from the insurance company.
NOTE: As long as you are insurable, no matter what your age, the numbers always work.
Concept No. 3—The tax benefits— yours for the taking—of life insurance. The cash surrender value (CSV) of your policy earns money, increasing your CSV. These earnings are tax-free. Your profit (the excess of your death benefit over your premiums cost) is income tax-free.
There are many ways to keep the death benefit of your policy free of the estate-tax monster. The most popular is an irrevocable life insurance trust (easy to do).
Let’s summarize. Using the above example, your after-tax cost of $272,235 (investment in the form of premiums) does the work of earning $3 million (to leave $1 million to your heirs).
Most clients say, “Wow”and smile a lot.
Now, using the basic concepts above, let’s take a look at three life-insurance strategies that very few professional advisors know about.
Strategy No. 1—“Health Guard.” Combining long-term care and life insurance, here’s a typical example: Mary is 65 and wants long-term care
32 METALFORMING / FEBRUARY 2010
www.metalformingmagazine.com
BLACKMAN ON TAXES IRVING BLACKMAN
Insurance Secrets They
Don’t Want You to Know About