Throw Back Thursday – A Simple Idea, No Crummey Letters

An Irrevocable Life Insurance Trust (ILIT) provides an estate with funds to help pay estate tax obligations. In most cases, spouses create an ILIT, designate a trustee and name their children as beneficiaries. The advantage of using life insurance to fund the trust is that if properly structured the death benefit can avoid estate taxes and income taxes.

A “Crummey”  ILIT takes its name from a famous tax case involving Reverend Crummey. See Crummey v. Commissioner.  The case set the ground work to make it possible to gift premiums to the trust without having to pay gift taxes. To pay the annual premiums on the policy, you can put in up to $14,000 per person for your family members.  Since you are essentially buying a policy that benefits your family, those premium payments would normally be considered gifts to your beneficiaries.  However, done properly, you pay no gift tax on those payments, and when you die the trust will receive the policy proceeds free of estate tax.

The big catch is administrative.  Technically, the trustee of the trust should send out “Crummey letters” each year informing beneficiaries they can withdraw the gifted amount during a specified window, perhaps 30 days.  Usually, the beneficiary leaves the money in the trust.  But the IRS considers it a tax-free gift only if the person has the right to take it in the short-term.  An annual Crummey letter proves it even if none of the kids follows up on it—as you generally hope they won’t.

The Crummey power idea—giving the beneficiary the right to withdraw money which you hope they will never exercise—can be added to various other trusts too.  However, the place most people fail is in bothering to send out the annual letters, and documenting that they did.  One recent Tax Court case, Estate of Turner v. Commissioner, didn’t spoil the deal over the failure to send letters, but you can’t count on the IRS agreeing with that result.  Get reliable professional help with such trusts, and make sure the duty to send out the annual letters is very clear so it doesn’t fall between the cracks.

So, with the complications of Crummey Letters, wouldn’t it be nice to find a simple way to implement an ILIT without the hassle of Crummey Letters? An ILIT using the Lifetime Gift Exemption may be the answer. Commonly referred to as the Simple ILIT this concept should be explored if any consideration regarding the annual gift exclusion could be an issue (like the kids won’t cooperate or there are not enough kids to fund the ILIT ) – a Simple ILIT with no Crummey Letters may make more sense.

A Simple ILIT uses the Lifetime Gift Exemption rather than the Annual Gift Exclusion.  With the current Lifetime Gift Tax Exemption at $5,250,000 – it makes sense in most cases to use the lifetime exemption to fund the ILIT rather than the annual Crummey Gifts. In the Simple ILIT as gifts are made to the trust – either one lump sum or on-going gifts – the person making the gift uses his lifetime exemption rather than the annual gift exclusion. This keeps it simple and offers some other advantages:

  • Children do not have to know and additional beneficiaries do not have to be sought
  • Because children’s spouses are not needed as beneficiaries, divorce complications are eliminated
  • Since children are not offered a present gift, the concept does not have to be re-sold every year that the gift is made
  • Since annual premiums are not required to take advantage of the annual gifting amounts, larger premiums can be put into the policy

Keep in mind, with this strategy an annual gift tax return (IRS Form 709) must be filed to inform the IRS that part of the lifetime exclusion is being used so gift tax is not triggered. Also, by using this strategy you also use up some of the unified credit exclusion for estate tax purposes so a full analysis must be done. But for many estates that need this type of planning this idea works very well and keeps it SIMPLE.

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Don’t Be Fooled


WARNING: Industry spin masters have been running misdirection plays putting agents, agencies and other IMOs out of position to do what they must to comply on June 9th. Why are they doing this? To control you and your future!

The fact is, the future is bright and does not include a new license. It does, however, require you make smart choices

Department of Labor Secretary Acosta confirmed on Monday that the fiduciary rule will begin phasing in June 9, requiring a higher standard of care for advice given on qualified retirement investments. The full requirements will go into effect on Jan. 1, 2018, barring further regulatory or legislative changes.

What this means for you

Starting June 9, those who give advice on investments in retirement accounts will be held to the Impartial Conduct Standards, which has three requirements:

  • Advice is in the best interest of the customer
  • Compensation is reasonable
  • Statements about investment transactions, compensation and conflicts of interest are not misleading

Between now and the end of the year, the current Prohibited Transaction Exemption (PTE) 84-24 can be used to sell all variable and fixed indexed annuities. While the full requirements of the Best Interest Contract Exemption (BICE) do not go into effect until Jan. 1, 2018, firms can decide between the two exemptions in the near-term.

At ISN we have the form you need to meet the PTE 84-24 Exemption. Most of the carriers we write with also have their own version of the form. Our version is generic and can be used if the carrier you are writing with does not have the form.

Between now and January 1, 2018, barring any regulatory changes, ISN will be working with our partners at IDA and with our other Synergy Partners to provide you the platform you need to be compliant with the new DOL rules. This includes new software for the point of sale, fiduciary back-up and BICE options that will be compliant with the new DOL Regs. Stay tuned for more information.

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Disability Insurance Awareness Month

May is Disability Insurance Awareness Month (DIAM). Throughout the month,  ISN Network will join many other concerned stakeholders in efforts to boost awareness of the risk of disabling illness or injury, the financial risk of work disability, and how private disability income protection safeguards working Americans against these risks.

Working Americans who rely on earned income to support themselves and their families need disability income protection. Yet about twice as many Americans working in private industry lack private disability income protection as have coverage.

If you are not already fully aware of – or fully protected against – the financial risk of disabling illness or injury, take advantage of Disability Insurance Awareness Month to give yourself peace of mind and your family improved financial security:

  • Make sure that you know whether you and your family have disability income protection.
  • If you have disability income protection through your employer, do the math to figure out if it is enough.
  • If you don’t have disability income insurance – or don’t have enough – speak with an insurance professional about acquiring coverage.


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Don’t Stress About Life Insurance

Stressed out about a medical exam to qualify for life insurance? Don’t be.

While not every type of life insurance plan requires a medical exam, there will be times that it’s necessary when applying for coverage. Unfortunately, there are many people who put off getting life insurance and don’t ask themselves “ How much life insurance do I need?” for fear of the unknown. The fact is, many people just don’t have the information they need to fully understand the process and put their minds at ease.

Scheduling your exam

For a typical life insurance exam, a paramedical examiner comes to your home or office – sparing the need to take time off from work or schedule an appointment with your doctor. The average exam doesn’t take too long – usually less than 30 minutes.

Tip: Since you will need to fast for at least eight hours prior to your exam, you might consider trying to schedule your appointment early in the morning. This way you can fast while you sleep and then be ready to take your exam. It’s okay to have a glass of water (especially since you’ll be required to provide a urine sample), but you should refrain from your morning coffee until after the exam. If you need to schedule an evening exam, you should eat a light, healthy lunch and try to stay away from caffeinated beverages.

Exam day

The exam is comprised of two main steps: The physical exam (includes a blood draw, urine sample, and measuring height and weight), and a medical questionnaire. Once the examiner is done administering your life insurance medical exam they may ask some additional questions about your health history. This will depend on the particular carrier and on how much information you submitted to your life insurance agent prior to taking your physical exam.

Tip: Knowing that a blood draw is looming can sometimes get a person’s heart racing and raise blood pressure. Here are a few tips to consider for the day of the exam. Try to keep your anxiety level over a brief blood draw to a minimum. If you feel that you simply can’t relax, inform the examiner and request that he or she draws your blood first and checks your blood pressure last, allowing time for your anxiety to subside. Often with the blood draw out of the way, you can begin to relax.

After your exam

Once completed, the examiner will submit your lab work for processing (i.e., screen your blood and urine for any negative health concerns), and the findings will be sent to the life insurance underwriter. Depending on the amount of insurance and your health history, a request will sometimes be sent to your personal doctor(s) asking for additional information from your medical records. Once reviewed, your life insurance company will offer you coverage based on those results.

Tip: Rating results are what determine your premiums. These ratings are typically determined by underwriting tables that are based on your overall health and health history scores, and fall under categories that may include: super select, preferred, standard select, standard, and so on down the line.

Getting the Best Results

Since your medical examination results will determine your rates, you want to try and shoot for the best results possible. Before your exam be sure to:

  • Get plenty of sleep
  • Do not drink alcohol for eight hours
  • Avoid drinking caffeinated beverages for eight hours
  • Limit your intake of high-cholesterol or salty foods for 24 hours
  • Don’t engage in strenuous physical activities for 24 hours


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A Note About Term Insurance

Term Life Alert from ISN Network

The “term wars” are getting crazy. That is, the competition for the term insurance client is becoming an ever-changing arena. Companies are re-designing their products, and lowering their rates for their preferred classes, so that they can say they are #1. The Internet search engines are designed to list products in order of price…and price is what is driving the Internet consumer.

At ISN Network, we understand this competitive arena and have the same capabilities to find the lowest price as any Internet search engine. But, what the Internet cannot provide is expertise in underwriting and placing cases. ISN Network knows that the lowest price listed on the Internet is rarely given to a fully underwritten client. This piece of the puzzle, the ability to place the case with the carrier with the best chance of a preferred outcome, is our competitive edge.

So don’t compete against a computer. Let ISN Network and our underwriting team show you how to win in the term wars. Call ISN Network @ 1-800-338-1892 and get contracted with the best term carriers in the business. Or better yet, contact us and get your own password and code to search our network yourself.

We can help you find the carriers that are going to have both low prices AND good underwriting.

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LTC Alert- The Cost of Caring for a Parent

Adult Children And The Cost of Caring For A Parent
There are about 10 million adults over the age of 50 in the United States who provide care for their aging parents. This group must also be planning for their own retirement and the task of being a primary caregiver can negatively affect saving efforts. A recent study from MetLife looked at the impact of caregiving on adult children and their future financial status.

During the past 15 years, the number of adult children providing primary financial or personal care for their parents has increased more than three times. About 25 percent of all adult children in the country today are the main care providers for their parents. The same number is almost equal to the number of non-working adult children who help their parents.

According to MetLife’s survey, the level of care provided by adult children to parents is about the same between male and female. However, men are more likely to provide financial assistance, and women tend to provide more personal care. The cumulative amount of lost Social Security benefits, pensions and wages among these adult caregivers is around $3 trillion.

The total amount of lost money from reduced hours at work or leaving the workforce early to care for an aging parent is about $143,000 for the average woman. The estimated loss of becoming a caregiver is about $131,000 in Social Security benefits and $50,000 in pension funds. For men, lost wages from leaving the workforce early or reducing hours totaled to about $89,000 on average. The average Social Security income loss is about $144,000, and loss of pension funds is around $50,000.

Because of stress, adult children who provide the majority of an aging parent’s care are more prone to serious chronic illnesses. They should strive to lessen the physical, emotional and financial burdens of caring for a parent. Here are some helpful tips:

  • If other family members are willing to help, set up a plan to divide expenses.
  • Use coupons, prescription discount cards and other saving aids when making purchases.
  • Research local community services and outreach programs for seniors.
  • Look for faith-based services and aid programs.
  • Buy any supplies that are used in large quantities in bulk.

Adult caregivers can save hundreds of dollars every year by employing these simple steps. AARP also recommends making individual care a top priority. Adults who care for their parents should eat well, get enough sleep and exercise. Mental health services and yoga or meditation classes are helpful in reducing stress. Joining a support group for other adult caregivers can also help. To learn more about this topic, discuss your concerns with an agent.

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DOL Ruling Delayed

As was suspected, the DOL has delayed the implementation of the new rule until,  June 9 2017. See attached link article.
Good news!  Regardless of the final outcome, ISN Network has solutions, more to come as this continues to develop!
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