Advice on Possible Big Case

[0b1kanobee]

So I've been out of the annuity game for a bit and I'm just looking to see how you guys might approach this case. I've got some assistance outside of this realm but figured I'd pick a few brains here.

So I have a prospect that recently inherited 9 million dollars. I haven't met with him yet but he has told me he wants to "put 4 million into an annuity/annuities and live off the interest". Now I know about laddering and that structure but to just keep things simple for now, let's just assume this is NQ money for now. The guy is 50 Y.O. soon to be 51 in July. He's not very bright and doesn't even have a drivers license (this is what I've gathered so far).

So my question is if you were going to put 4 million in and live off the interest, what products would you be looking at for him? The guy I work with wants to bring up a variable annuity if it looks right as part of the equation but I don't want to confuse this guy too much (have to see how this meeting goes). But back to my original question for simplicity sake. Also a little concerned my buddy might not be able to make the appointment with me and at the same time I don't want him to kill the deal and pitch some things way to complicated to understand for the prospect. Sorry but at this time I have little to no other info on the prospect except that he is also single. I will be speaking to my new marketer tomorrow but at least he seems sharper than the old marketer lol

Obviously I'll have to get approval for over a million. We might just let the VA rep with Lincoln pitch the VA and then dismiss him and see what the client thinks (hash that out) (good strategy we use) and I might just meet with the guy with perhaps my Jackson rep. Don't know yet. The guy I work with writes about 8 million in annuities on average per year but he also takes a big % of my pie so if this is a simple case I'd rather have all the pie (just a sidebar of info).

 

[scagnt83]

Since he is under 59.5 I would suggest looking at ML-CDs for income during his 50s, not annuities.

I also would split the $4mill up between carriers to reduce risk.

 

[Tahoe Ray]

What are his income expectations/need from this 4 million?

Your product mix/direction will likely be defined not just by his risk tolerance but by what he thinks he needs/deserves from this pot of money.

Also, it has been already suggested but I would not put it all with one carrier either...

 

[0b1kanobee]

Since he is under 59.5 I would suggest looking at ML-CDs for income during his 50s, not annuities.

Why does that come into play for NQ money? If some of this money is qualified there is 72t no?

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What are his income expectations/need from this 4 million?

Yeah that I don't know yet. Not sure if he knows. If he does he didn't volunteer it. Was going to ask but was more concerned about getting an appointment. Sort of a semi-cold lead.

 

[sman]

Since he is under 59.5 I would suggest looking at ML-CDs for income during his 50s, not annuities. I also would split the $4mill up between carriers to reduce risk.

Why not use some of it for muni's? Not a muni fund, but actual muni's. You cut out the federal income tax and could cut out the state tax as well if using in state muni's. A person with $9 mil should really try and reduce taxable income as much as possible.

 

[scagnt83]

Why does that come into play for NQ money?

Because the IRS imposes a 10% penalty even for NQ if its in a Tax-Deferred Annuity.

You could annuitize or do a 10y SPIA to avoid it. But thats the only way.

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If some of this money is qualified there is 72t no?

If you create SEPs then yes. If its qualified the annuity will not matter other than potential surrender charges.

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Why not use some of it for muni's? Not a muni fund, but actual muni's. You cut out the federal income tax and could cut out the state tax as well if using in state muni's. A person with $9 mil should really try and reduce taxable income as much as possible.

You certainly could. He needs a good Bond advisor though... lots of ins and outs to it. I agree they should reduce taxes as much as possible.

IMO, the savings are what should go into annuities to avoid current taxation.

The money to create income should go into non-annuities at least for the next 9 years. A combo of a few different methods would be best for that large of an amount... Munis/ML-CDs/Tax focused Mutual Funds/Dividend paying stocks

Way too much risk to put that much all in a single investment or single type of investment.

 

[0b1kanobee]

Where are you guys getting your contracts for ML-CDs? Care to say or shoot pm?

A lot of times I suggest that people look at other things as you both have mentioned which I why I partner up with a securities guy. He didn't mention the 10% penalty or if he did I did not hear him. He did mention possibly having to use 72t very briefly. I think the guy is concerned about losing any of his money or spending it perhaps. Looks like I'm gonna need an expert on this one and that's ok now that I know I'm good with it.

 

[Norwayguy]

Where are you guys getting your contracts for ML-CDs? Care to say or shoot pm?

A lot of times I suggest that people look at other things as you both have mentioned which I why I partner up with a securities guy. He didn't mention the 10% penalty or if he did I did not hear him. He did mention possibly having to use 72t very briefly. I think the guy is concerned about losing any of his money or spending it perhaps. Looks like I'm gonna need an expert on this one and that's ok now that I know I'm good with it.

He is concerned with losing money and your thinking of pitching a VA?

 

[Tahoe Ray]

Why not use some of it for muni's? Not a muni fund, but actual muni's. You cut out the federal income tax and could cut out the state tax as well if using in state muni's. A person with $9 mil should really try and reduce taxable income as much as possible.

This is good advice...

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He is concerned with losing money and your thinking of pitching a VA?

I thought the same thing.

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Where are you guys getting your contracts for ML-CDs? Care to say or shoot pm?

A lot of times I suggest that people look at other things as you both have mentioned which I why I partner up with a securities guy. He didn't mention the 10% penalty or if he did I did not hear him. He did mention possibly having to use 72t very briefly. I think the guy is concerned about losing any of his money or spending it perhaps. Looks like I'm gonna need an expert on this one and that's ok now that I know I'm good with it.

Most IMOs have a ML-CD connection if they don't offer them directly.

On a NQ annuity, you would either need a 72 (q) (the "t" version is for qualified funds) or just do a period certain SPIA lasting more than 10 years.

There is a lot that you can do with a case like this but most of it comes down to client expectations, tolerance, and objective.

It's good that you're partnered with a securities guy but as sman points out, muni bonds may be good in the short term and for that, you'll want someone who specializes in bonds (which is not most people with a securities license).

I have a case like this currently that is very similar...we now have 6 different people involved in the advice process.

It is very much worth your time and money bringing in experts on a situation like this.

Good luck.

 

[0b1kanobee]

Yeah the VA thing. I've got to say that every VA this guy has wrote (we are related so I know) is above water. Plus he puts an income rider on every one. Right now he's liking a Lincoln VA. But I'll tell ya he's been writing VAs since 2008. A handful of my clients have one with him. All happy last I knew and I think he only goes 5 years on them. I will ask him again if any are under water.