1. Creating a Legacy through life insurance
WEALTH TRANSFER
Now that we have discussed options regarding TSP, let’s take a look at one more opportunity as it pertains to federal employees…the Wealth Transfer Concept. This is a concept for those employees who are looking for ways to pass on a legacy to the next generation upon their passing.
Creating a Legacy through life insurance

2. How to determine a “legacy” client…
Income Source
C1 & C2 Live
C1 Passes
C2 Passes
Pensions
$6,500
Pension $0
Social Security
$2,750
$1,500
Other
Total
$10,750
Income Goal
Needs
$7,500
Difference
$3,250
Wants
$2,500
$10,000
$750 TF
Legacy
Wants
Needs
So how do we determine if a federal employee COULD POTENTIALLY be a fit for such a strategy? Here we take a look at a retirement income worksheet (advisor use only) that can help us identify such clients/prospects. In this example we see that the client has not only enough guaranteed income sources to meet their needs in retirement but their wants as well. These income sources also have built in inflationary hedges (pensions and SS) which is an important thing to consider. Once a client such as the one above has been identified it is also important to make sure the client is properly insured against disability, long term care and early death (survivor must be taken care) of. We have to ensure that the clients’ needs are met 100% while living. Once that has been established you now have identified a client who may be a good candidate for legacy planning… T TD

3. “Legacy” client Case study…
John (Age 65) & Jane Doe (Age 65)
John is a retired federal employee who is also retired military.
Retirement Budget shows total income budget of $10,000/month
Guaranteed Income Sources total $10,750/month
“What-Ifs” have been planned for through Life Insurance & LTC Insurance
John & Jane have identified $200k in tax-deferred assets they will not need in retirement that will have required minimum distributions in 5 years…
So with that being said, let’s look at a case study. (read off facts and reiterate income sources and proper insurance planning). For the $200k the clients would like to use for legacy planning what is one idea, assuming good health, to transfer these $s to the next generation? Many clients would simply take their RMDs, and take the after-tax $s and put them towards a Registered Account that will owe taxes on any gains (capital gains). Here is another idea…

4. A strategy…ANICO SPIA & Lincoln SGUL
$200,000 into a SPIA to Fund 2nd to Die Life Insurance Policy:
SPIA provides Joint Income payout with 100% to Survivor that funds life policy
Payments from SPIA leverage an INCOME TAX-FREE Death Benefit as a Legacy
NO RMD calculations 70 ½
SPIA
If the clients are healthy then one option would be to utilize a SPIA with these qualified $s. We would set the SPIA up to provide income with 100% to the surviving spouse and a 20 year period certain. This ensures payments will continue until the 2nd spouse’s death and helps protect against both passing early. We then would take the SPIA payment (in this instance call it $900/month) and would fund a 2nd to Die Life Insurance policy that would provide an INCOME TAX FREE DB (could be estate tax free as well with proper use of an ILIT). Taxes would be owed on the $900 that could be paid from another source which would allow us to solve for a DB based on premiums of $900/month. In this instance, assuming Std. NT on both, that would buy $688,270 in LI DB today! (please use the 624-e UW Expectations Form to gauge insurability). To put this leverage into perspective let’s look at an IRR report on Lincoln’s Second to Die illustration…
2nd to Die Life Insurance
$688,270 Death Benefit Income Tax-Free

5. A strategy…ANICO SPIA & Lincoln SGUL
This IRR Report allows us to see the IRR on the Death Benefit in a given year vs premiums paid in. Obviously if the clients pass early on the returns are enormous (Year 1 6,277.97% IRR on Premiums Paid). However, to really see the value of the life insurance let’s take a look at the IRR at life expectancy…in this instance it is Age 93 and in that year the IRR vs premiums paid is still 5.23% or a taxable equivalent (assuming a 28% tax rate) of 7.27%! This is a very strong number and can help get the client to buy off on the idea.

6. THANKS
That is all! Thank you for your time today and let me know if you have any questions I can answer. Thanks!
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