BestWeek One-on-One: Estate Tax Law Represents ‘Unique Opportunity’ for Life Insurance Agents

The new U.S. estate tax law represents a unique opportunity for life insurance agents to help wealthy clients engage in legacy planning but the temporary law probably won’t translate to a big increase in life insurance policies being sold by companies that focus on this market, an industry expert says.

Following “a mad rush” in December to pass the law, the industry worried demand for life insurance would drop, said Michael Amoia, vice president of advanced sales for Crump Life Insurance Services. Crump Group is one of the largest brokerage general agencies in the United States.

The estate tax has long been the cornerstone of marketing estate-related life insurance policies.

Estate taxes represent a reduction to the money in estates that will be transferred to heirs, he said. So a need for a life insurance policy is created to the degree that there will be “a quantifiable dollar amount” because of the tax. It ties to the need for cash, said Amoia, an estate-planning attorney.

Crump Life, which focuses on the wealthy, connects about 200,000 independent agents and financial services professionals across the United States with products offered by about 100 insurance companies.

President Barack Obama signed into law in December the tax deal that set estate tax rates for 2011 and 2012 at 35% — a decrease — with an exemption of $5 million per individual and $10 million per couple — an increase. Under the George W. Bush-era legislation that altered the estate tax terms, there was no federal estate tax in 2010 (BestWire, Dec. 17, 2010).Industry experts have said that fewer people will engage in traditional estate planning and the new law provides no long-term certainty.

But Amoia said one of the conversations he’s had with wealthy clients is that the law represents “a unique opportunity” for legacy planning. Suddenly, life insurance, outside an estate, creates an asset class for those clients because for the next two years, they can move money into trusts to create a legacy and “the ultimate goal at the end of the day is to try to create the biggest pot of money for our clients.”

What happens at the end of 2012? There likely will be an estate tax, and there will be a need for planning, Amoia said. Even if there isn’t one, the bottom line is that Crump Life continues to tell clients to do some planning today. There’s a wealth of other planning issues that arise that have nothing to do with taxes, such as creditor protection and asset protection, that they need to consider, he said.

To see the entire interview with Amoia, go to http://www3.ambest.com/ambv/displaycontent/MediaArchive.aspx?PC=3008

(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com)