MKA Executive Planners Blog

After tax supplemental compensation plans funded with life insurance offer a hybrid arrangement that reduces the complexity and expense associated with non-qualified deferred compensation plan. These plans are a great benefit for a company to offer to non-owner key executives to retain and reward them for their valuable services. They are especially attractive in pass through entities such as Subchapter S corporations and tax exempt organizations.

Executives generally are not aware that they have shortfalls and gaps in their broad based group long term disability coverage.  This applies to both the size of the monthly benefit and the language in the contract that the insurer uses to accept or deny claims.

Substantial risk of forfeiture, exposure to claims of creditors, large balance sheet accruals and embarrassing lump-sum payments on the front page of your local paper. Does this sound like an optimal retirement accumulation plan for your highly compensated physicians and executives?

If you are a person with a need for large amounts of life insurance, whether for tax planning (income or estate), liquidity planning, estate balance or income, here are 5 questions you should investigate before entering into a transaction.

Not a lot of assets?

Got a big IRA account?

No use for a Trust?  Wrong!

Most everyone is familiar with the rule that you must take an actuarially determined “required minimum distribution” from your Individual Retirement Account” in the year you turn age 70^1/2 and each year thereafter.

While driving to see a client not too long ago, I heard a commercial for a local investment advisor on a local radio station, ostensibly a recording of some thoughts on how his firm might plan for a young couple in the event the husband was to die in the near future.  Both husband and wife were employed. They had two young children.  

Long Term Care Insurance has come a long way since its inception.  It is no longer a “use it or lose it” proposition, and the sources of funding for long term care coverage now include the cash value of existing life insurance and deferred annuities that may no longer be needed.

Section 457(b) and 457(f) plans are the most common supplemental retirement accumulation plans utilized by tax exempt organizations.  While many provisions apply to both models, the rules applicable to 457(f) plans are particularly onerous.  Here are 8 ugly facts about Section 457(f) plans.

Life insurance has many tax favored advantages, the most significant of which are the potential tax-free cash accumulation, tax-free withdrawals and tax-free death benefits.  In addition, in the event of an untimely death, the beneficiaries can use funds from a life insurance policy to maintain their current lifestyle, for retirement purposes, funeral and burial expenses, probate, estate taxes, daycare, and any number of everyday expenses.  Funds can be used to pay for a beneficiary’s education or to pay debts or a mortgage.  Recent product innovations include a long term care benefit rider which allows the owner access to policy cash values or death benefit for long term care needs of the insured.

The one thing I know for certain about life insurance illustrations is that the non-guaranteed assumptions are always wrong.  The economy does not proceed at a steady growth rate, yet that is what illustrations show for non-guaranteed assumptions.  Life Insurance is an important financial instrument that needs to be monitored and reviewed on a regular basis.  Without proper review and adjustment, if necessary, the policy owner may be faced with unexpected “sticker shock.”