Annuities

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Annuities Life InsuranceDouble Edged Planning
Devices

• Or try this for a title -
• Annuities Life Insurance in
• Estate Planning

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What Well Cover
Clients with existing deferred annuities
Annuities life insurance for clients with other
assets
Travelers Life Annuity Supports
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What About Life Annuities

• Annuities
• Useful for retirement planning
• Offers tax deferred growth
• Wide range of distribution options
• Life Insurance
• Premiums purchase death benefit
• Risk borne by life insurance company
• Can they be Used Together?

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Annuity Funded Life Insurance
For Clients with Existing Annuities
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The Life of an Annuity
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Dilemma for those not planning to tap annuities

• The Double Tax Problem
• Estate taxes - client
• Income taxes heirs
• Erosion at top income brackets in the 70 range

Based on a 1,000,000 annuity with a 350,000
basis. Client estate tax rate is 50 and heirs
income tax rate is 40.
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A Solution

• Tap a portion of the annuity each year
• Funds will be taxed sooner or later
• Can withdraw or annuitize
• Withdrawals more control
• Annuitize potentially lower taxation
• Gift the after-tax amount each year
• Recipient buys life insurance with the funds

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Classic Case
Distributions to client
Gifts to Trust
Any Remaining Annuity to Heirs
Life Insurance Proceeds to Heirs
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Numbers Behind the Case

• If clients did no planning
• 500,000 annuity grows to 1,263,649
• Estate and income taxes 806,136
• With no planning - Heirs would only net 520,513
• With Planning
• Annual annuity withdrawal of 41,667, nets
  30,000
• 30,000 gifted to a trust
• Gifts purchase 1,600,000 life insurance
• Heirs receive death proceeds plus any remaining
  annuity

All assets presented are hypothetical. Annuity
is assumed to be 500,000 with a 100,000
investment and growing at a 5 average annual
return. Income tax rate 31, Estate tax rate
is 45
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Ideal Client

• Age 60 or older
• Annuity(ies) not needed for retirement
• Has a potential estate tax problem
• Estate of 3,000,000 or above

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Muni Max
For Clients with Other Assets
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Where Will Annuities Life Insurance Make Sense?

• Clients who will see assets eroded by estate
  taxes
• Clients who have income producing assets and
  are unhappy with the income
• CDs
• Dividend Paying Stocks
• Bonds (taxable or munis)

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How Can Annuities Life Insurance Work for these
Clients?

• Client sells asset producing disappointing income
• Net after-tax amount goes into a life only
  annuity
• Income is increased through liquidating annuity
• After-tax annuity payments
• Replaces income
• Excess funds can purchase life insurance outside
  estate
• Assets inside estate disappear at death
• Life only annuity
• Life insurance outside estate replaces asset

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If Client Does No Planning
20 Years Later Asset worth 1,399,736
Client has 750,000 in stocks, at a 1.5 dividend
Total return is 5
With No Planning - Earns 11,250 or 6,750
after-tax
IRS takes 699,868
Heirs net 699,868
All assets in this presentation are purely
hypothetical. Assumes a 40 income tax bracket,
50 estate tax bracket. Original asset basis is
500,000 client is 65.
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If Client Does Muni Max Approach
Annuity replaces income. May even boost income
Excess funds used to purchase life insurance in
trust
Client sells the asset pays taxes - Nets
700,000
Uses the after-tax proceeds to buy an immediate
annuity
Heirs receive a 1,000,000 death benefit a
boost over no planning
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Numbers Behind the Case

• Client sells 750,000 Asset with 500,000 cost
• Nets 700,000 after taxes
• Uses funds to buy a single life annuity
• After-tax annuity payout 52,540
• Replaces 6,750 after-tax income 45,790 remains
• 30,000 towards gifts for life insurance premiums
• Provides for a 1,000,000 death benefit
• Client has excess funds of 15,790

All assets presented are hypothetical. Annuity
is based on a single life annuity purchased on a
65 year old but is not representative of any one
insurance product. Your clients results will be
different.
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Ideal Client

• Holds income producing assets
• Unhappy with current income
• Is able and willing to sell the asset
• Has a potential estate tax liability
• Approach can potentially eliminate the asset for
  estate taxes boost income
• Can qualify for life insurance
• Usually between ages 65-75

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Travelers Life Annuity Supports
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Supports from Travelers Life Annuity

• Client presentation
• Client materials
• Strong Advanced Sales support
• Provides you with back-up on the concept

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The TLA Advantage

• Competitive Life Product Portfolio
• Skilled High-End Underwriting Support
• Case Design Marketing Support
• Brand Name Recognition Strong Financial Ratings

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Whats Next?

• Review your book of business
• Identify potential prospects
• Contact your TLA wholesaler

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What We Covered
Clients with existing deferred annuities
Annuities life insurance for clients with other
assets
Travelers Life Annuity Supports
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Questions
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Important Disclosure

• Travelers insurance products are issued by The
  Travelers Insurance Company or the Travelers Life
  and Annuity Company, One Cityplace, Hartford, CT
  06103
• Variable products are offered by Travelers
  Distribution LLC as principal underwriter.
• Investments in variable life insurance are
  subject to market risk, including loss of
  principal.
• IMPORTANT NOTICE The foregoing discussion
  involves complex tax and legal issues. This
  discussion is not a legal opinion, it is only
  meant to provide guidance. The decision whether
  or not to implement these ideas rests with the
  clients tax and legal counsel.
• Travelers Life Annuity nor its representative
  are authorized to offer tax advice. Clients must
  consult with their own independent advisors.