June 20, 2024

The majority of Americans (77%) say that estate planning is important for everyone, regardless of wealth level, according to a 2021 Edward Jones survey.
Yet, the data shows that most do not have an estate plan in place. And trends are getting worse. Just 32% of Americans have a will, a 2022 Caring.com survey found.
Add it up and it seems Americans are lost when it comes to estate planning. The answer might be as easy as starting with a good life insurance policy.
After all, advisors have plenty of evidence that life insurance soared in popularity during the COVID-19 pandemic.
David Appel is managing partner at Appel Insurance Advisors in Newton, Mass., and has 28 years in the business as a life insurance-focused planner.
“I’ve never seen people take their life insurance as seriously as they have since this pandemic started,” he said.
Survey data does not lie, and much of it shows that Americans are woefully unprepared when it comes to estate plans. Likewise, retirement planning in general is lax. Advisors say life insurance today is a very versatile product that can help clients achieve many different goals.
“Life insurance is so versatile that the same products can protect a young couple, help pay off debt or take care of a mortgage, or make sure that a college education is there for a child,” Appel said, “and protect that established family who have brick-and-mortar assets and need liquidity on debt.
“And life insurance is still one of the best ways to provide capital and provide liquidity for that family to pay state taxes, federal estate taxes, gift taxes, whatever it may be, as that estate is passed on to the next generation.”

The story of the life insurance market as 2022 heads into the homestretch is one of possibilities. Sure, sales are good, but the possibilities are greater.
Total U.S. life insurance new annualized premium increased 17% in the first quarter of 2022, representing the fifth consecutive quarter of double-digit premium growth, according to LIMRA’s First Quarter 2022 U.S. Retail Life Insurance Sales Survey.
“Nearly half of life insurers reported premium gains in the first quarter, but the majority of the growth came from the top 10 carriers,” said John Carroll, senior vice president, head of insurance and annuities, LIMRA and LOMA. “Nine of the top 10 reported double-digit growth. Combined, their sales increased 32% from last year.”
However, signs of slippage appeared as the third quarter pushed deep into the summer. Applications for individual life insurance slipped 6% in June 2022 over June 2021, according to MIB Group’s U.S. application activity report.
For the year, life insurance activity remained up nearly 3% through June, reported MIB, a consortium that provides data solutions to support the industry.
The data reveals clues about which life insurance strategies advisors likely are using. Among the age 71 and older set, life insurance activity climbed 5.4% in June. Those sales certainly reflect the use of life insurance for estate planning, long-term care arrangements or tax sheltered retirement plans, experts say.
Chris Acker heads CB Acker Associates Insurance Services in Redwood City, Calif., and is president of the Silicon Valley chapter of the Financial Planning Association. Acker leverages his connections in the advisor community to provide a variety of insurance plans to upscale clients.
“Being affiliated with the financial planning community has helped me understand that while there is urgency in placing life insurance because it’s important, it’s also important to know where life insurance fits in a financial plan,” he explained. “Because when you are working with the family and doing their financial plan, they see the recommendation for the insurance and they know where it fits, they know why it makes sense.”
Although the core value of life insurance is family protection, life insurance has evolved into a valuable tool for estate and retirement planning. Interest among clients in those uses is very strong, advisors say.
Andrew Bucklee is head of life and executive benefits distribution for Lincoln Financial Distributors and a 36-year veteran of using life insurance for estate and retirement needs.
“A strong estate plan can help clients solidify their financial future and take control of the assets they worked hard to attain,” Bucklee said. “Combining a trust with life insurance not only offers clients protection for their family, business and legacy, it also helps them control how their legacy is distributed.”
A good financial professional can help identify the right insurance solution for specific needs, Bucklee noted. In addition to trust-owned life insurance, second-to-die — or survivorship insurance — can be used for estate planning or to pass along death benefits to children or grandchildren, he explained.
“When it comes to estate planning and transferring wealth, there can be many considerations, such as minimizing the impact of estate taxes, making a charitable gift, or ensuring business continuity,” Bucklee said. “Financial professionals can play an important role in developing goals-based estate planning strategies on behalf of clients and helping them understand the flexibility that survivorship products bring to the process.”
The pandemic gave insurers a double boost. One, the entire industry was forced to adopt long-delayed technology that made insurance selling faster and easier. Americans can now get a life insurance policy in a matter of days.
Second, it jolted consumers with a dose of brutal reality. According to LIMRA, 31% of consumers said they were more likely to buy life insurance due to the pandemic.
“Four in 10 people who witnessed their friends and family members become severely sick from COVID-19 reported higher levels of stress and financial concerns,” noted Jennifer Douglas, research director at LIMRA. “Today, more Americans are worried about providing their families with a strong financial safety net so the impact of external variables, like the pandemic or the economy, can be mitigated.”
As 2022 rolls into the homestretch, insurers are trying to keep the momentum high by emphasizing the versatility and family protections life insurance offers. Those uses go well beyond estate and retirement planning. Tax planning, for starters.
Although many people know that life insurance provides valuable death benefit protection used for estate planning, Bucklee acknowledged that they may not understand the living benefits available through the product, especially how those benefits can be advantageous from a tax perspective.
“A properly designed life insurance policy can offer benefits as a complement to traditional qualified retirement vehicles,” he said. “With no income limits, tax-advantaged cash-value growth potential and the potential for supplemental retirement cash flow, there are many reasons to consider life insurance when planning for retirement.”
High net worth clients must be wary of persistent efforts by the Biden administration to raise taxes on the wealthy. The proposal resurfaced again in the administration’s 2023 budget.
As of press deadline, Sen. Joe Manchin, D-W.Va., had struck a deal with Democratic leadership on a bill that aims to close the so-called carried interest loophole, a longtime goal of Democrats.
Carried interest refers to a long-standing Wall Street tax break that let many private equity and hedge fund financiers pay the lower capital gains tax rate on much of their income, instead of the higher income tax rate paid by wage-earners.
Eliminating the loophole would raise $14 billion, Democrats say. Biden has remained steadfast on fulfilling his campaign promise to raise taxes on families making over $400,000 annually.
That means opportunity for financial planners to place tax-sheltering strategies within retirement and financial planning. The end of 2021 saw a flurry of tax-favored life insurance sales, and 2022 could see a repeat of that business uptick.
Sometimes advisors catch a big case, where a big life insurance policy can rescue a family from a major tax heartache. Appel recalled a husband-and-wife client, referred by an advisor, who had combined assets totaling $40 million, with about $25 million of that tied up in annuities and qualified retirement plans.
The estimated federal and state estate taxes, plus income taxes on the qualified money, were going to shrink that estate by 62%, Appel’s analysis found.
“They had no idea,” Appel said. “They never really considered the income tax and how so much of their estate, $25 million out of the $40 million, had never been taxed from an income tax standpoint. And the question is, ‘Do you want to pay the tax now and buy some life insurance to be able to offset this and re-create this estate for the family?’
“Because if you don’t pay the tax, the kids are going to pay the tax. Someone’s paying the tax. It’s just a matter of when and how.”
It’s always a good idea to advise clients to have investment “buckets,” Appel said, and not all in qualified accounts.
Appel likes to show private equity or venture capital people the internal rates of return with a good life insurance policy, and what they can get from a growth perspective inside, or upon death.
“It’s not a sexy investment they’re used to investing in, but it’s a very solid income investment,” he said. “And that’s why even billionaires and people with hundreds of millions of dollars are still looking to life insurance.”
In other tax news, Biden has supported returning the federal estate and gift taxes to pre-Trump levels. While not part of the administration’s current plans, that does not mean they are going away.
Currently, the unified federal estate and gift tax lifetime exemption is at a historically high $12.06 million. Unless Congress acts to change the law, the current exemption amounts will sunset on Dec. 31, 2025. That means the exemption will revert to 2017 amounts of $5 million (adjusted for inflation).
The IRS has stated that there will be no “clawback” for gifts made under the increased estate and gift tax lifetime exemption. In other words, the IRS will not retroactively assess gift tax on any lifetime gifts in excess of the sunset exemption amount.
Therefore, this offers a unique time for taxpayers to maximize the value of the current lifetime exemption before it’s potentially reduced. Under the current law, if no action is taken by the end of 2025, a family could be on the hook for an estimated $4.6 million in additional estate taxes.
That opens the door for a large life insurance policy to offset that bill.

Long-term care is climbing the list of retirement concerns, according to a recent study by LIMRA, with Americans unsure how they will pay for it. Just 12% of Americans said they were worried about LTC in 2019, a figure that grew to 37% in 2021. According to the study, six in 10 Americans would consider a combination life insurance policy — a life insurance policy with a long-term care component.
Insurers saw a substantial increase in long-term care insurance policies sold in 2021, but Jesse Slome, executive director of the American Association of Long-Term Care Insurance, considers it a one-time bump related to Washington state requiring residents to get LTCi or face a tax for a new state benefit.
U.S. underwriters added 153,687 new lives to their books in 2021, compared with roughly 57,200 during the previous year, according to an S&P Global review of annual regulatory statements.
But advisors say enthusiasm for LTCi products definitely is growing.
Acker sees it from the client referrals he gets from advisors. He reports six active claims for long-term care services at the moment, and about a dozen total. It is a growing business, Acker said, with the riders delivering a lot of value to those claimants.
“A lot of people say, ‘I’m going to self-insure for that,’” Acker said. “And you can self-insure. But if you think you’re going to need help getting out of a chair, help getting out of a bathtub — whether by grab bars or actually somebody right there — then you’re going to be eligible for a benefit. You don’t have to be flat on your back and basically comatose to collect benefits.”
Another big selling point for LTCi riders is that many of the policies are interest-rate sensitive. So when interest rates are rising — as they have several times this year — the premiums go down. OneAmerica and Nationwide are two companies that reduced premiums this summer.
Beyond the tax issues, the general economic malaise can make life insurance a tough sale. While the pandemic made Americans very aware of the threats to family security and general health, the ensuing economic downturn sapped pocketbooks.
Americans might have good intentions about getting life insurance coverage, Appel noted, but the funds might not support it. The Dow Jones being down double digits so far in 2022 only adds another variable to that complicated equation.
It often adds up to a good news, bad news situation for advisors trying to gauge the public appetite, Appel concluded.
“Sometimes people will think that when the market’s flying, they might not need insurance, or it’s easy to pay premiums,” he added. “But as the market is going down, the premiums aren’t as easy to come by, but they also feel not as wealthy as they did before the market drop.”
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