From Live On to Leave On

Regional Vice President Paul Garofoli shares his unique strategy for clients who wish to leave a legacy without being subject to underwriting: 

It was our tradition. When I visited my out-of-state mom in Massachusetts, we had a ritual. I would retrieve a wicker basket from the top of the refrigerator. It was full of envelopes. We then would sit at the kitchen table and review each envelope. They were statements representing the Janet Garofoli estate plan — account summaries from various banks, mutual funds, some stocks and an annuity or two. She would take each envelope and identify who she wanted the proceeds to go to, “This is for my son; this is for my nephew,” eventually naming an envelope for each of her remaining grandkids, my brothers and a sister. 

You see, in my mom’s mind, what many would consider “live on” assets had now become “leave on” legacies. And underscoring that commitment you should know that, in the last 10 years of her life, my mom was confined to a wheelchair. The basket on top of the refrigerator with the sum of her assets was literally untouchable! 

It’s that consideration financial professionals need to take into account. At some point, your clients will make that pivot that some or all of their assets — particularly annuities — are destined for someone else. And when that occurs, there is a great strategy available: the Legacy Max Enhanced Death Benefit Rider. 

The Legacy Max is an optional death benefit rider with our flagship fixed indexed annuity, the Enhanced Choice Index Plus. It’s available through age 80 with no minimum issue age. Accumulation continues to age 85 or seven years, whichever is greater. The death benefit value can be quite substantial with a unique dual crediting strategy. There is a minimum guarantee of 6% compounded growth along with an index crediting doubler. The death benefit is the greater of the two values. My mom would have been a great candidate for Legacy Max because there is no underwriting. 

Legacy Max Key Features

The initial benefit equals the total premium. Each contract anniversary the benefit increases by the greater of:*

• Guaranteed enhancement value: Provides 6% annual compounded growth.
• Performance enhancement value: Applies a growth factor of 200% each anniversary to the total amount of interest credited. 

The death benefit is limited to the greater of:

• 125% of surrender value excluding any MVA.
• Premium received accumulated at a 10% annual effective rate, but not to exceed 250% of all premium received — minus any withdrawals including surrender charges.

Legacy Max Client Profile

• Clients up to age 80.
• Intends to leave the asset to someone else (i.e., they don’t need for living expenses in retirement).
• Due to health issues, they would have difficulty qualifying for life insurance. Or, they simply prefer to avoid underwriting. 

Here are some case scenarios:

The Durable Uninsurable

Some clients understand the value of life insurance but may not qualify. While it’s important to note that an annuity death benefit does not have the same attributes of life insurance — namely a tax-free death benefit — it’s a reasonable alternative. And while you don’t get the immediate leveraging of traditional life insurance, the value can build over time, especially with the performance doubler. 

Life in Strife 

Due to some faulty assumptions, underperformance or premium payment fatigue, cash value life insurance policies can be subject to lapsing. Thanks to the ability to go from life insurance to an annuity with a tax-free 1035 exchange, these policies can be rescued, and the death benefit value can recover over time with the Legacy Max Enhanced Death Benefit Rider. 

RMD Reluctant 

If you have clients who complain about taking required minimum distributions, or RMDs, that’s a sign of their intentions to leave the annuity as a legacy. An annuity death benefit rider can effectively allow for “having your cake and leaving it too.” With a dollar-for-dollar offset, qualified account holders can satisfy the RMD requirement and still see the death benefit grow. 

Spouse in the House 

Most annuity configurations are one spouse as owner, the same person as the annuitant and the other spouse as the beneficiary. Upon death of the owner, proceeds will be payable to the surviving spouse. But many surviving spouses elect to continue the annuity under spousal continuation. 

The Legacy Max Death Benefit Rider provides three options for the spouse-beneficiary. 

1. Take a lump-sum death benefit (with Legacy Max it’s the full value).
2. Elect spousal continuation and continue the death benefit rider.
3. Step up the annuity’s accumulation value to the death benefit! Here, the rider ends. 

My mom passed in 2015. Her grandkids and my siblings did receive the benefit of her “leave on” assets. I’m confident that you have clients and prospects who want to do what my mom did. And now with what arguably may be the best death benefit rider in the industry, you can increase the value of a legacy funded by an annuity reliably and significantly. I hope you do.