Four important Questions to ask your clients before 2011

Posted by Nickelle Leist on Thu, Dec 9, 2010 @ 10:08 AM

The end of the year presents a significant opportunity for you to connect with clients, open the door to new sales, and extend your value as an insurance professional when it comes to the important role that life insurance can play in a financial plan. With December 31st rapidly approaching, the window is open right now for you to take this opportunity to contact clients.

Here are four key questions to ask clients before the year ends.

Question 1: For business owners with life insurance policies on employees:  Are you in compliance with IRC § 101(j)?

Business owners who are not aware of the compliance requirements for IRC § 101(j) and 6039I could lose the income tax-free benefits on the death benefit received from an employer-owned life insurance contract (EOLI). Notice 2009-48 was recently issued to provide further guidance on EOLI rules. Asking this question can also create an opportunity to discuss related issues such as: buy-sell agreements, tax deductions, qualified plans and personal policies. 

Question 2: With all the recent changes in the financial environment, Does your current life insurance policy still meet all your needs and goals?

There are estimates that fewer than 10% of all producers conduct policy reviews with clients—and the indication is that these producers may also be some of the most successful in the profession.1 In addition to conducting reviews of life insurance policies held by individuals, reviews should also be conducted with trustees of life insurance trusts and charitable organizations. Up to 90% of life insurance policies held institutionally have never been reviewed or thoroughly evaluated since issuance.2

A policy review may result in a change in the premium, death benefit, or lead to a new policy (either through surrender of the old one and purchase of a new policy or through an IRC § 1035 tax-free exchange).

Question 3: Do you know that you still have time to implement a qualified plan for your business before the year ends?

The qualified plan must be implemented by December 31, 2009 and documents signed by that date—however, the plan does not need to be fully funded at the same time. It can be funded in 2010, before the tax-filing deadline.   

Qualified plans include:

• 412(e)(3) defined benefit plans for those interested in a guaranteed retirement plan
• Split-funded defined benefit plans for those who prefer the flexibility of investing contributions in a number of different vehicles including life insurance, stocks, bonds, mutual funds, and annuities.

Clients who have not yet implemented a qualified plan can still go ahead and sign documents now in order to take advantage of the tax deduction for 2009.

Question 4: Have you considered making a charitable gift before the year ends so you can receive an additional tax deduction?

Gifts of cash, life insurance or stock can be made to qualifying charitable organizations or trusts before the year ends to take advantage of tax deductions. A check written this year as part of a charitable legacy plan can result in a significant tax savings. This may also serve as a springboard to a discussion of other charitable planning options such as using life insurance as part of a charitable legacy, or establishing a charitable remainder trust or charitable lead trust such an enhanced charitable trust (ECLAT).