Blog

April 21 2023

NFP Acquires Diversified Brokerage Services, Inc.

NFP Acquires Diversified Brokerage Services, Inc., Expanding its Life Insurance Distribution Capabilities

Acquisition adds a well-established brokerage general agency (BGA) specializing in supporting life insurance sales for financial advisors across the country

NEW YORK – April 21, 2023 – NFP, a leading property and casualty broker, benefits consultant, wealth manager and retirement plan advisor, today announced it has acquired Diversified Brokerage Services, Inc. (DBS). Acquiring DBS expands NFP’s life insurance business with capabilities that support larger financial institutions, including broker-dealers, wirehouses and RIAs. DBS principals George “Chip” Van Dusen IV, president and CEO, and Tori Van Dusen-Roos, COO, will join NFP and report to Mike James, executive vice president, chief sales officer. The acquisition closed on April 10.

“I’m very excited to welcome Chip, Tori and their team to NFP,” said James. “They are industry leaders in supporting financial advisors through enterprise relationships with large financial institutions and will be valuable partners for our advisors and producers. With DBS onboard, we will provide an enhanced, differentiated offering across our existing retail and wholesale life insurance businesses. I look forward to DBS’s contributions to our growth, culture, and support of current and future clients.”

Minneapolis-based DBS is one of the largest life insurance BGAs in the United States. They support financial advisors across the country through enterprise relationships with large financial institutions, as well as individual relationships under a wholesale model. DBS offers various value-added services to these advisors, including education, point-of-sale support and placement.

“We’re thrilled to join NFP, an organization with significant scale in the life insurance space that shares our focus on growth, people and community,” said Chip Van Dusen and Tori Van Dusen-Roos in a joint statement. “We have very ambitious goals for growth, and with their commitment and resources, NFP is the ideal partner to help us achieve it. It’s exciting to see so many opportunities to collaborate and deliver additional value and expertise to our current distribution partners as well as those with whom we build relationships.”

View press release here.

About NFP

NFP is a leading property and casualty broker, benefits consultant, wealth manager, and retirement plan advisor that provides solutions enabling client success through the expertise of over 7,000 global employees, investments in innovative technologies, and enduring relationships with highly rated insurers, vendors and financial institutions. NFP is the 9th best place to work for large employers in insurance, 7th largest privately owned broker, 5th largest benefits broker by global revenue and 13th largest broker of US business (all rankings according to Business Insurance).

March 29 2023

Raising Interest Rates and Legacy Planning

Situation

Interest rates factor into the performance of many legacy and charitable planning techniques. Over the past several years, the historically low interest rates, and the availability of high gift and estate exemptions have provided a unique environment for certain legacy and charitable planning techniques. Specifically, in low interest rate environments grantor retained annuity trusts (GRATs), charitable lead annuity trusts (CLATs), intra-family loans and installment sales to grantor trusts work best. However, relatively small shifts in interest rates can have a disproportionate effect on the performance of these rate-sensitive legacy planning techniques. The Increase in interest rates over the past year has changed the economics and shifted the focus to other techniques.

With the shift in Interest rates there has been renewed interest in certain legacy and charitable planning strategies that benefit from a high interest rate environment. Techniques that benefit from a higher interest rate environment include qualified personal residence trusts (QPRTs) and charitable remainder annuity trusts (CRATs). This Counselor’s Corner describes some of the legacy planning techniques impacted by interest rates and the role of life insurance.

1 _john-rodenn-castillo-eluzJSfkNCk-unsplash

March 24 2023

Finding Life Insurance Opportunities Using Form 1040

A careful review of a client’s tax returns can provide insight into their insurance and financial planning needs. A review of the lines on a tax return can lead to conversations about:

• Basic needs analysis and college funding
• Retirement and extended care planning
• Legacy & charitable planning
• Business planning

Additionally, comparing last year’s tax return to this year’s tax return can shed light on planning opportunities due to major changes in the client’s life.

Form 1040 was redesigned in 2018. Now, everyone will use Form 1040* and Forms 1040A and 1040EZ will no longer be used. Originally, the new Form 1040 was shorter, but has increased over the past couple of years. In addition to the Form 1040, individuals may need to file schedules.

Tax planning remains an essential aspect in any work with clients at all income levels. A review of your client’s tax return should allow you an opportunity to assist them in addressing decisions that can impact their overall income tax, accumulation, and retirement planning. Life insurance provides features that can help clients particularly in a changing tax environment.

This guide focuses on Form 1040, and Schedule A. The guide is designed to help you review and uncover opportunities within your client’s income tax return. In addition to paying attention to what is disclosed in the client’s tax return, note what is missing. This may also result in opportunities.

Read Full PDF

*Starting with tax years 2020, seniors may use Form 1040-SR.

March 16 2023

Greenbook Deja’vu: Proposed Tax Increase on Wealthy

On March 9, 2023, the Biden Administration released its budget and tax proposals for FY2024. Alongside the Budget the Treasury released its document further describing the revenue proposals in what is typically called the Greenbook. Many of the proposals are reminiscent to those in prior years’ Greenbook.

The budget proposes to increase taxes for corporations and for individuals with incomes above $400,000 as part of a plan intended to reduce federal budget deficits by $2.858 trillion over 10 years. The release of the President’s FY 2024 budget comes at a time when President Biden and Congress are debating how to reach an agreement on legislation to increase the federal statutory debt limit. House Republicans are expected to lay out their own budget proposals in coming weeks.

Read more to view a summary of some of the proposals that may be of interest to financial professionals.

February 28 2023

Standby Survivorship Trust an Alternative to an ILIT for Insureds Desiring Control

Situation: The uncertainty of the estate tax laws has created a dilemma for many taxpayers, estate planners, and insurance professionals. Should moderately high net worth couples take action today to shelter a significant amount from estate tax (under the $12.92 million exemption) by making a large gift; or should they hold off making a large gift and hope that the value of their estate stays under what is likely to be a much smaller exemption in the future?

One of the most obvious examples of this dilemma is found with the traditional irrevocable life insurance trust (“ILIT”), which has played a critical role in estate planning for many years. If an ILIT is established, access is significantly limited. On the other hand, if a decision is made to wait to establish an ILIT, the proposed insured’s health could deteriorate, thus significantly increasing the cost of insurance coverage. Even worse, the individual may become uninsurable and insurance may be unavailable especially in this COVID environment.

The Standby Trust (also referred to as the Wait-and-See Trust) was developed as an alternative to the ILIT because it permits the insureds (i) to purchase survivorship life insurance today based upon current underwriting conditions and (ii) to retain a great deal of flexibility. This Counselor’s Corner provides information about this arrangement.

Solution: In general terms, the Standby Trust arrangement utilizes an ownership and beneficiary structure on a survivorship policy on the lives of a married couple. The insured with the shorter life expectancy is named the initial owner of the life insurance policy (“the insured owner”) and premium payer. At the time the insurance is purchased, a trust (i.e., the Standby Trust) is also established as either an existing stand-alone (revocable or irrevocable) trust or as a testamentary trust and is named the contingent owner and primary beneficiary.[1] If the estate tax continues to not apply to the client’s situation, the Standby Trust may not be utilized. On the other hand, if the estate tax does apply, then the life insurance policy can be transferred to the Standby Trust in an attempt to minimize future estate tax consequences.

Under this arrangement, trust ownership of the policy is normally deferred until after the death of the first insured, thus giving the insureds the time needed to make any irrevocable decisions concerning the ultimate policy ownership. Consequently, during the lifetime of both insureds, this arrangement provides the insured owner of the policy with (i) a great deal of flexibility, (ii) easy access to cash values for retirement and other uses, and (iii) the potential to exclude the net death benefit from the estate of both insureds. It is important to note, however, that there is a price associated with all of the flexibility. In a Standby Trust arrangement, since the insured owner initially owns the policy, the entire cash value will be included in his/her taxable estate if he/she is the first to die. The application of the so-called “three-year rule” of IRC Section 2035 is also a possibility.

[1] Since this technique does not require ownership of the survivorship policy by the Standby Trust from the inception, it is not necessary to have the Standby Trust in existence at the time of policy application. However, it is prudent to have the trust established as soon as possible.

Read Full PDF

February 21 2023

Legislation Addressing Long-Term Care: An Urgent Matter

Virtually all demographic trends in the United States point to large future increases in the demand for long-term care services and support. By 2050, an estimated 27 million people will need long-term care support.

The population over 65 will almost double by 2050.ii The population age 85 or older is set to double between 2015 and 2032, and triple by 2050. This aging population will outpace the number of working-age family members who can help seniors financially or with unpaid care.iii
Disability is highly related to age, so the projected growth in the elderly population suggests a large increase in the need for long-term care services. It’s projected that more than half of Americans turning 65 today will have a long-term need for constant attendance, averaging $266,000 per person for about 2 years of serious self-care services.iv Millions of older adults, approximately 14%, will need services for more than 5 years.v
New generations of American seniors have fewer caregivers and more complex illnesses, each causing more serious disability.vi Seniors who live longer have longer spells of need and higher financial burden from disability, plus they have less family support.vii

Studies indicate that Medicaid is the dominant source of payment for long-term care costs and its share has increased over the past 20 years, while the individual share has decreased. In 2019, an estimated $426.1 billion was spent on long-term care services and support.viii

A typical senior can afford only about 12 months of nursing home care, assisted living care, or extensive home care using their financial wealth.ix Once an individual exhausts their financial assets, they can become eligible for Medicaid, a jointly funded federal-state health care assistance program for low-income individuals.
It’s estimated that 1 in 5 seniors will end up impoverished, using Medicaid to cover their long-term care costs.x
Approximately a third of Medicaid outlay goes to provide long-term care services and support.xi

View print-friendly PDF here.

Three senior black women laughing together outdoors

February 14 2023

6 Reasons Women Need Long-Term Care

Long-term care planning is important for everyone, but it is arguably most important for women. Why? Longevity and caregiving.

1) Women live longer than men.

Women outlive men by about five years on average. Women who are married tend to outlive their husbands. A woman born in 1960 has a life expectancy of 73 years, compared to 67 years for a man born in the same year. Women who reach age 65 can expect to live an average of 20 more years and those who reach age 75 an additional 13 years. A third of long-term care insurance claims begin between ages 70 and 79; over half (55%) begin after age 80. More than two-thirds of Americans age 85 or older are women. Eight out of 10 centenarians are women.

2) Women need more long-term care than men.

Women spend twice as many years in a disabled state (as men) at the end of their lives: 2.8 years if they live past 65, and 3.0 years if they live past 80. More than 70 percent of nursing home residents are women. Their average age at admission is 80. Over three-fourths (75.7%) of residents in assisted living communities are women. Their average age at admission is 85.7. Almost two-thirds of formal (paid) home care users and informal (unpaid) care recipients are women. Among people age 75 or older, women are 60 percent more likely than men to need help with one or more activities of daily living such as eating, bathing, dressing or getting around their home.

3) Women receive more LTC insurance benefits.

Roughly two-thirds of the $6.6 billion in long-term care insurance claim benefits paid in 2011 were paid for women needing care.

4) Women are the nation’s caregivers.

The typical caregiver is a 46-year-old woman who spends 20 hours a week providing care to her mother. One in six caregivers provide 40 hours or more of care per week and women are more likely to provide high levels of care. Approximately 75 percent of those providing home care are female — most often a daughter. Women spend 50 percent more time giving care than men do. When women become caregivers, they are 2.5 times more likely to end up in poverty and five times more likely to depend on Social Security.

5) Elderly women are highly vulnerable to poverty.

Elderly women are more likely than men to run out of resources in later life. Divorced or separated women are the most vulnerable because they have lower incomes and fewer resources. The share of elderly women living in poverty is 37% for divorced or separated; 28% for widowed, 22% for never married and 10% for married.

6) Women are unable to afford long-term care.

Almost 70 percent of women age 75 or older are widowed, divorced or never married (compared to about 30 percent of men). The difference in marital status is very important. Because women are much more likely to live alone, they have no one in their household to help with daily activities. Nearly half (48%) of women age 75 or older are living alone, compared to less than one quarter (22%) of men. For women age 75 or older and living alone, the median household income as about $14,600 (2005). Married couples had a median household income of $35,000.

View print-friendly PDF here.

February 10 2023

The Perfect Storm of Estate Planning

NOW is the time to talk with ALL clients about the importance of estate planning. It’s a perfect storm that can either be “waited out”, to a client’s potential detriment, or acted upon. You should ACT because if you’re not helping clients prepare, who is?

Read about the four elements that are brewing together to create this perfect storm, along with the strategies that can help in this environment.

View PDF

January 23 2023

Stretch Demise Mandates Beneficiary Review

Read our print-friendly PDF version

With the passage of SECURE 2.0 and the opportunities it provides, financial professionals are reminded of the changes made in the original Act. In addition to making other changes to retirement plans and IRAs, SECURE 1.0 changed the rules on distributions for deaths occurring after December 31, 2019.

Stretch Distribution Over Beneficiary’s Life Eliminated.
Under the old rules, with proper planning the life expectancy of the beneficiary could generally be utilized to determine the minimum annual distribution requirement (RMD). For example, if the beneficiary of an IRA is age 50 under the old rule distributions could be taken out over 34.2 years. This distribution option was referred to as “stretch.”

The Secure 1.0 eliminated the stretch option for all but five classes of so called “eligible designated beneficiaries.” Eligible designated beneficiaries who can still receive stretch distributions include surviving spouse, children of the plan/IRA owner who have not reached age of majority, disabled/chronically ill individuals, and beneficiaries that are not more than 10 years younger than the plan/ IRA owner.

January 6 2023

President Biden Signs SECURE 2.0 Legislation as Part of Spending Legislation

By Terri Getman, JD, CLU, ChFC, RICP, AEP (Distinguished)

On December 29, 2022, President Biden signed into law the more than 4,000-page spending bill. In addition to funding the government to September, the legislation included provisions of what has been called SECURE 2.0. The SECURE 2.0 package is full of popular reforms that have been supported by the financial services industry and backed by a rare bipartisan consensus. Aimed at increasing retirement savings and expanding availability and participation in employer sponsored retirement plans, Secure 2.0 contained over 100 provisions. There are several of the provisions we believe financial professionals and their clients will be interested in.

Read print-friendly PDF