ROTH annuity options

[DHK]

I highly don't Van Mueller has a client with $1000 per month income in 0% tax bracket paying $85k yr in life premiums. I just don't foresee a case where someone is in the 0% tax bracket & they are put in 22%, 30,35% not to mention state, SS tax & Medicare premium surcharges would be well received by anyone reviewing the case details. Most reputable life carriers also have maximum % of income or liquid assets that can be used to pay life insurance premiums.

All in moderation I believe.

Watch the whole video sometime. It's 4 hours. He says he makes his largest sales in 800-1200 square foot homes where people are saving money out of their social security. He gets the client to tell the underwriters what the strategy is and, if insurable, to let them buy the policy to do what Van talks to them about.

 

[DHK]

But one fact we do know, it has been 100 years since someone with $36k in income has not been in a 24% tax bracket.

40 years... and $36k in income was 43% (MFJ).

Granted, far more tiers, but 24% was at $16,000... in 1980.

Federal Income Tax Brackets for Tax Year 1980 (Filed April 1981)

 

[scagnt83]

Best interest garbage doesn't matter. They'll judge the product and the situation and how much is left as liquid assets.

Being approved by the carrier and being compliant with the law are not the same thing.

 

[DHK]

I know that the OP was also looking at Allianz for their ability to do roth conversions.

Athene can do the same.

This was an email I got 6 months ago:

 

[DHK]

Being approved by the carrier and being compliant with the law are not the same thing.

There is only one standard for the law: Did the client understand everything being discussed including the benefits and consequences? Meaning: was there full disclosure and was it understood?

That's it.

The law doesn't regulate my recommendations. My recommendations must disclose how the laws affect their assets, give them alternatives as to what they can do, and what *I* might do if I were them with my knowledge.

If I can conclusively demonstrate that the client will be better off AND the client understands it, that's the documentation I need.

 

[scagnt83]

40 years... and $36k in income was 43% (MFJ).

Granted, far more tiers, but 24% was at $16,000... in 1980.

Federal Income Tax Brackets for Tax Year 1980 (Filed April 1981)

Fair enough. But $36k in 1980 is the equivalent of $90k in today's dollars.

So the point remains, how great of a concern is it that this woman with $3k of income per year will be in a significantly higher tax bracket 10 or 20 years from now...

 

[scagnt83]

There is only one standard for the law: Did the client understand everything being discussed including the benefits and consequences? Meaning: was there full disclosure and was it understood?

That's it.

The law doesn't regulate my recommendations. My recommendations must disclose how the laws affect their assets, give them alternatives as to what they can do, and what *I* might do if I were them with my knowledge.

If I can conclusively demonstrate that the client will be better off AND the client understands it, that's the documentation I need.

The carrier only knows what you have told them. So again, just because an application is approved, does not mean the recommendation was legal.

And yes, the law says you must be able to document and prove the client would be better off with your recommendation. Taking a $6k per year loss in interest earnings to avoid $2500 per year in taxes does not accomplish that. So the only way to get this case through carrier suitability would be to "omit" the main reason for the whole recommendation of the conversion.

 

[DHK]

Suitable, not 'legal'.

The law doesn't regulate my recommendations. I do. My recommendations must conform with the laws, rules, and regs surrounding the products we use, but I make the recommendation (and responsible for it)... not "the law".

"The law" doesn't require any documentation, other than the required paperwork. It's a best practice to have other supportive or supplemental documentation to back up your transactions in the event of complaint, client "selective memory", or any other reason.


Insurance companies... don't seem to notice too much though, even those with broker/dealers. I don't worry about them approving or not. They most likely will. It has to pass MY test of whether it'll work or not.

For the OP, I was just throwing out ideas. I don't know the client and I did not do the fact-find. There's some information in the OP post, but it's up to us as the actual agent & advisor to help ensure that what we recommend... is a good fit for our clients based on their concerns and the concerns we bring up to them.

 

[DHK]

Fair enough. But $36k in 1980 is the equivalent of $90k in today's dollars.

So the point remains, how great of a concern is it that this woman with $3k of income per year will be in a significantly higher tax bracket 10 or 20 years from now...

Inflation is an involuntary tax on people with low income. So even if tax rates for this income bracket never increase (which I believe would be true for current tax policy), that doesn't negate that there would be other ways to devalue that income stream. It's only been, what 6% this year?

So either she'll need less income or need to pull out more income for the same standard of living.

Just depends on what's important to her.

 

[scagnt83]

Suitable, not 'legal'.

The law doesn't regulate my recommendations. I do. My recommendations must conform with the laws, rules, and regs surrounding the products we use, but I make the recommendation (and responsible for it)... not "the law".

"The law" doesn't require any documentation, other than the required paperwork. It's a best practice to have other supportive or supplemental documentation to back up your transactions in the event of complaint, client "selective memory", or any other reason.


Insurance companies... don't seem to notice too much though, even those with broker/dealers. I don't worry about them approving or not. They most likely will. It has to pass MY test of whether it'll work or not.

For the OP, I was just throwing out ideas. I don't know the client and I did not do the fact-find. There's some information in the OP post, but it's up to us as the actual agent & advisor to help ensure that what we recommend... is a good fit for our clients based on their concerns and the concerns we bring up to them.

When it comes to a best interest state (what the conversation was about) legal is the term, not suitable.

Of course the law doesnt make the recommendation. The law dictates how you must arrive at a recommendation and how you must document that process.

And yes, case law certainly dictates that you document. The actual legal code does not, but case law has decided it is a requirement. That is why career shops REQUIRE fact finders for every client.

Carriers approve a lot that they shouldnt. Some agents omit parts of the situation because they know the carrier would not approve the sale if they disclosed it. (like paying 100% more in taxes than their current situation)