Page 47 - MetalForming December 2011

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 main- tain 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 some- one 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 experi- enced, 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 out- dated. 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 pol- icy is replaced with a new one, the client winds up with a sig- nificant 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.-
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
tel. 847/674-5295 Blackman@EstateTaxSecrets.com www.taxsecretsofthewealthy.com
old policy: $10 million death benefit, $2.9 million CSV. Mil- dred’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 premi- um payments by Mildred.
How can you join the tax-free wealth-building fun enjoyed by Joe, Larry and Mildred? Just meet the following requirements:
1) Are you 48 years old or older?
2) Do you have a policy that’s about 10 years old or older, with a CSV of $200,000 or more?
3) Are you healthy for your age? If married, at least one of you must be healthy; best if both are healthy.
If you meet these requirements, I encourage you to follow this strategy. Begin by sending a copy of this article to your CPA. Then, ask him to contact his insurance consultant to review your policy. Yes, a new subject like this always leads to good questions. So, do you—the reader—or your CPA have a question?. Call me at 847/674-5295. MF
Blackman on Taxes
By Irving Blackman
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