Meeting with estate planner

[llessac15]

Last week I met with an estate planner. He was from the insurance company that I have all of my vehicle, home, and auto insurance through. I was told it was a free service to all of their high-income clients. Well, by the time the meeting was all said and done, he had my net worth calculated as 3x what I consider my usuable net worth. With that new number, he went on to recommend more term life insurance for myself, a policy for my wife, and encouraged me to take out a permanent life insurance policy.

I have a feeling this guy was here to recruit more policies for the insurance company, and not here for my best interest. He asked me why I was against whole-life and I told him that my good ole pals WCI and Bogleheads say they are the devil. He looked at me funny for a second and then just continued on. He probably said "guaranteed tax free money for you kids" about 50 times.

Anyway, be on guard all my fellow docs. We are definitely walking around with targets on our backs.

[Hank]

You may or may not need more term life than you currently carry.  You almost certainly don't need to feather his nest with a commissioned whole life policy.

Assuming that you and your wife stay below the state and federal estate tax limits, assets with a stepped up basis at death also should provide tax free money.

An all but guaranteed crappy return from a whole life policy (or GUL, or variable annuity, or so many other commissioned products) would be a pretty bad deal.

[ajm184]

It is more than doctors whom need to be on guard.  It certainly sounds like your instincts are correct.

a. Was this 'estate planner' your regular insurance agent?  If so, I would be searching for a new set of auto/home policies.  If not, I would make it very clear to your insurance agent that your insurance relationship is at risk by continued calls/discussion from this insurance company's 'estate planner's'.  Let your agent be the 'bad guy' shutting these internal 'estate planner's' down.

b. I'm sure there are a number of tools that can be used to self-assess your family's need for additional term insurance.  Better you go to them from position of knowledge and questions versus a 'pitch'.

c. 'Estate planning' at least in my opinion is much more about the legal transition of assets through the use of trusts, POA's etc upon death versus the sale of a given insurance product.

[Faithful Steward]

I suspect that your suspicions are correct. I've seen too many of these scenarios where insurance companies offer these "free" bonus services to their clients; and the "service" normally ends up being a sales pitch reverse-engineered to lead to a life insurance sale. This type of, "The answer is life insurance, what was the question, again?" mentality was prevalent at a few of my previous firms and was the main reason I strove to become a fee-based advisor who accepts the mantle of fiduciary with my clients.

I'd be curious, did this "estate planner" even review your existing estate planning documents? Also, were they a licensed attorney?

[Craigy]

This thread is a good warning.  An estate planner should always be an attorney.

Otherwise you can hire your own financial advisor or CPA to help you manage your finances and determine if you're adequately insured.

An estate planner doesn't help you calculate your net worth and put money in accounts.  That's a secretary or a CPA's job, depending on complexity.

[VagabondMD]

There is no free lunch. Avoid those ubiquitous free steak dinners, too. It's better for your health and wealth to stay home and have a salad.

"a free service for high net worth clients" sounds like salespeak for buttering up a whale prior to the killshot.

[Craigy]

Vagabond MD wrote:

There is no free lunch. Avoid those ubiquitous free steak dinners, too. It’s better for your health and wealth to stay home and have a salad.

“a free service for high net worth clients” sounds like salespeak for buttering up a whale prior to the killshot.

Click to expand...

Agree with everything except the salad bit.   :lol:

[Uncle Scrooge]

So if a family's networth was over the $10million limit, how would WLI make sense?

[ajm184]

Uncle Scrooge wrote:

So if a family’s networth was over the $10million limit, how would WLI make sense?

Click to expand...

Start Here:  https://www.whitecoatinvestor.com/what-you-need-to-know-about-whole-life-insurance/

[Hank]

Uncle Scrooge wrote:

So if a family’s networth was over the $10million limit, how would WLI make sense?

Click to expand...

The federal estate tax exclusion is indexed to inflation.  For 2017, it's $5.49M per individual, or just under $11M for a married couple.

North of $11M, you might have a need for whole life.  That said, gifts during your lifetime, trusts, donor advised funds, and other vehicles might help you get around a federal estate tax problem before you need to look into whole life.

[Craigy]

Hank wrote:

Uncle Scrooge wrote:

So if a family’s networth was over the $10million limit, how would WLI make sense?

Click to expand…

The federal estate tax exclusion is indexed to inflation.  For 2017, it’s $5.49M per individual, or just under $11M for a married couple.

North of $11M, you might have a need for whole life.  That said, gifts during your lifetime, trusts, donor advised funds, and other vehicles might help you get around a federal estate tax problem before you need to look into whole life.

Click to expand...

It's presently set at $5.49M and indexed for inflation.  The laws change on this every couple few years, typically as different administrations come in and out of power.

Also, FWIW, my high net worth clients' estates grow at a faster rate than the estate tax exemption.

But absolutely there are plenty of other strategies you can use to mitigate exposure to estate taxation, whole life is far down the list.

[Craigy]

Uncle Scrooge wrote:

So if a family’s networth was over the $10million limit, how would WLI make sense?

Click to expand...

There are a number of ways you can use insurance to help with estate tax.  Couple of examples:

Large, illiquid family business that can't afford to take a 40 or 50% hit when the patriarch or matriarch dies.  E.g., family farm.  Term or whole life insurance can be used to hedge against possibility of having to sell half the farm to pay the estate tax.

Insurance held outside of taxable estate, funded by annual exclusion gifts, etc., can provide a large estate tax free benefit while also burning down the taxable estate to the extent of the annual exclusion gifting.

You're still paying a lot of money for the insurance, particularly as you get older and the cost of insurance goes up.  The premium payments on a $5M or $10M policy are enormous when you're in your 60s or 70s.  There is no free lunch.  But for some situations, it works.