The elections are over. Republicans ran the table. Now, agents who were preparing to meet with clients to discuss the “either-or” approach to sunset planning described in “Helping clients plan their life insurance strategy for potential sunsets” are focusing exclusively on the non-sunset side of the equation. In fact, I wouldn't be surprised if the notion of abolishing the wealth tax entirely is now finding its way into the conversation.

A More Consultative Conversation

There is no more interesting aspect of the sunset planning discussion than the potential use of a lifetime residence. However, to ensure that the transaction is given due consideration in that discussion, agents and the life settlement companies they call upon for assistance may need to revise their typical approach to presenting the transaction in favor of a more consultative one. It's a bit of a paradigm shift, mainly because it's not the usual exercise in selling the transaction to a policyholder who can actually use the money. This is an exercise in consulting on the transaction with a client who doesn't need the money and can't get it anyway because the policy is owned by an irrevocable life insurance trust (ILIT). This conversation requires a very different tenor, texture, and pace than the usual life resolution presentation.

The setting and the players

A wealthy client purchased a large policy several years ago to provide estate tax liquidity. The policy is held in an ILIT, supported by either cash gifts or a dollar-denominated plan. While the election apparently eliminated the need for estate tax liquidity, the client and their planning team are ready to begin considering whether the ILIT should retain the policy, albeit perhaps with a change or two, redefine it for other needs or strategic goals, exchange it for a new policy, or sell it to achieve yet other objectives, such as paying off client loans in ILIT allocated dollars or simply getting a return better for the money invested in the policy.

As the orchestrator of the several discussions the client and team will need to reach a conclusion, the agent faces a multifaceted challenge. They must describe a clear technical, nuanced and confidential set of facts, planning issues and possible responses to an advisory panel consisting of lawyers, tax advisors, investment advisors and, of course, ILIT trustees, all with different levels of understanding of: and professional interest in what is involved here. So the agent and the representative of the life solution company (company) who joins the agent on the call must be prepared to meet the customer and the team where they find them to bring them up the learning curve at a pace sufficient to avoid creating analysis paralysis. Easy, right?

Here is a suggestion. in “The No-Sunset Life Insurance Paradigm Shift May Be Underway Now,” I recommended that agents consult with advanced planning attorneys who will assist them in these discussions. Here again, I recommend that the agent talk to and “prepare” the rep so that, as a team, they are in sync about where to go in the conversation, where not to go, and, critically, where each of the advisors will come from when they ask their questions.

Key points of the presentation

We will assume that the agent has reviewed the matter with the company so that when the group moves to the Life Settlement agenda item, the agent can briefly introduce the company and the representative and their credentials and then get down to business. Here's what the agent plans to cover, with timely support from the representative:

• At a high level, if the policy is marketable. Can they go that way?
• Ballpark only: how much ILIT can get for politics
• Tax implications of the sale. Remember, the ILIT is likely to be a grantor trust, which means the ILIT will keep the full proceeds of the sale, but will send the tax bill to the client, which will definitely affect the discussions.
• What the agent will look for to get a more definitive reading, ie the process, who does what and how long it takes.
• Knowing that, in many situations, the discussion will likely come down to a decision to sell the policy and reinvest the proceeds or keep it at the lowest life support price, how the agent and the company can help the client and the team to make an informed decision. Because the client's investment advisor and ILIT trustee will take center stage in this aspect of the discussion, the agent should be sure that the representative has seen my articles”Residence Life – Planning Considerations Beyond Supply “and”How should trustees incorporate life solutions into the ILIT reviews.”

That's it. Anything more at this point will be “TMI”. Anything less will rob the discussion of the momentum it needs. This is not an easy balance for the agent and representative to strike. But once they get past their first presentation, they can refine it and have their own template for discussions with other clients.

I cannot overstate the value of the contribution that the agent and the company can make to the discussion if done correctly. And I'd be very surprised if that input doesn't result in some referrals from those advisors.