Top 5 New Year’s Estate Planning Resolutions

Top 5 New Year’s Estate Planning Resolutions

Going into the holidays is a good time to start thinking about your New Year’s Resolutions.  As the year ends, we reflect on all that we have accomplished.  We should then consider what goals to set for the coming year.  In 2020, make the decision to SURPASS your 2019 accomplishments.  This motivated outlook doesn’t just benefit you.  As you succeed, your clients will succeed.  An easy way to begin is by setting some estate planning resolutions.  Below are 5 suggestions from Mercury Specialist Bruce Popper CFP®, ChFC:

Review Your Clients Estate Plan in Light of Tax Law Changes

Given the fluid environment of estate tax law, we believe it’s crucial for clients to continue planning while keeping flexibility in those plans.  In the event that the existing gift and estate tax exemptions are doubled, what changes to your client’s estate plans should be made to take maximum advantage of these changes?  And what if those tax exemptions turn out to be temporary?  Unfortunately, no one can predict the future.  Planning for estate taxes is only one very small piece of the puzzle and the beauty of a modern estate plan is that it can be made flexible enough to change as their life and the laws change…which they absolutely will.  Your clients will appreciate knowing that you’re following the tax law changes closely and keeping their best interests in mind.  Many advisors feel that it is the attorney’s or CPA’s job to discuss changes and opportunities with clients.  Actually, this responsibility is owned by no one and everyone at the same time.  How would the client feel if a significant opportunity was missed because no action was taken, mainly due to lack of guidance from their full advisory team?

Make Time for Policy Review

Existing Life Insurance is an asset and as such, should be reviewed to make sure it’s potential is being maximized for the benefit of the insured and the family.  This is true of personally owned life insurance, business-owned life insurance and trust-owned life insurance.  The choices of what to do are based on 3 things:

  1. the client’s objectives
  2. the workings of the existing policy
  3. the client’s financial situation

Current health is also an issue but there are workarounds for that.  Options could include keeping the policy as is, modifying the payment structure, exchanging it, canceling it, selling it or spending it.  Significant changes have been made in these products over the years and taking advantage of better pricing or features, should that be the outcome of the review, can often be done on a tax-free basis.  This activity ALWAYS leads to a “thank you” from clients as they get positive feedback in all cases, no matter what.  When is the last time a qualified third party provided an opinion on the options available?

Are Your Client’s Assets Protected from Creditors & Predators?

A legitimate question to ask is, “how can we safeguard your hard-earned wealth?”  Did you know that 40% of UHNW investors’ top financial concern is protecting their assets from creditors and predators?  In almost every state there is significant asset protection for assets held in LLC’s, FLP’s, certain trusts, life insurance and annuities.  Are your clients’ assets held appropriately or could it be worth reviewing in light of new acquisitions, personal objectives or legal changes?

Assure Your Client’s Assets are Going to the Right People, at the Right Time, in the Right Way.

A carefully crafted estate plan should also include a review of:

  1. how assets are titled
  2. the disposition of assets by will or trust
  3. the designated beneficiaries of retirement accounts and life insurance.

There is no one-size-fits-all beneficiary designation.  It is extremely important to coordinate the distribution of these assets with the client’s desired estate planning objectives.  If you are uncomfortable or unwilling to ask your clients some tough questions regarding their relationships with their beneficiaries or their thoughts about how certain future family scenarios may play out, we are more than equipped to handle those conversations with the tact necessary to get the answers while not offending anyone.  There is unparalleled peace of mind that comes from KNOWING that the legacy you choose to leave is left in a manner that nurtures and supports versus propping up counterproductive behavior.  Do your clients have that level of inner satisfaction with their existing plan?

Tax Efficiency.  Is There More You Can do to Reduce Current Income Taxes or Future Income Taxes?

A well-constructed estate plan also takes tax-efficiency into consideration as part of the overall plan.  After all, increasing tax efficiency can provide greater wealth transfer to heirs and/or charity.  If the current estate tax exemption doubles in size, many wealthy individuals will immediately turn their full attention to income tax planning.  Once a client’s goals and objectives are understood, there may be several options that can be considered by your clients to reduce income taxes now, in the future and possibly forever, no matter what the tax law may be.  Remember, you have to pay taxes but you don’t have to leave a tip!  Are you in front of the planning wave for your clients?

Any of the above resolutions, if considered and implemented, is a positive step forward.  Following through on all will provide comfort to your clients by knowing you are committed to them and their families. Are you ready to get started? Contact your local Planning Specialist or fill out our contact form.

Mercury Financial Group does not provide tax or legal advice. All clients are urged to seek counsel on such matters. Be sure to have your client contact their attorney and CPA before taking action.  



When we work with clients we like to present options and choices. Generally speaking, doing nothing is not one of our recommendations when it comes to planning matters.

When you’re talking about planning for your estate, your business, your charitable intentions, etc., doing nothing is typically not a great choice. It’s rare we’ve ever seen “doing nothing” work out well.

Over the past decade, we’ve seen a number of tax law changes. So many changes, it seems, some clients have chosen to throw up their hands and say “what’s the use? They’ll just change it again next year!” While it’s totally understandable to be frustrated by all these changes, choosing to do nothing will not help your situation.

Given all these tax law changes, many of which were not necessarily expected by those of us who closely follow Washington, a sensible and popular strategy is to take a “wait & see approach”.

What does that mean?

First off, it means doing something—not nothing. Without doing a deep dive here and getting technical, it means taking some planning steps now but leaving yourself some very attractive options should the tax law change again down the road. So you implement some key steps now, all while building in various escape hatches in the event the law doesn’t go the way you hope. And if it does, we’ve built in alternate paths we can pursue that still put you in a far better position than simply doing nothing.

Rare is the client we’ve met with, years after the first meeting, where they chose to do nothing and it worked out well for them. In planning circles, it is known that time is our enemy. It is limited, and it is finite. And it is foolish to think “well, I’ll get to that one day.” Sadly, we can recall clients who chose the do-nothing path only to see it end very badly for them. And worse, for their family left behind with a mess.

Doing nothing never works out well. Taking steps now is the right path. And for those unsure of the future, a “wait & see” approach might fit the bill perfectly.

Are you ready to discuss solutions and engage your clients? Fill out our contact form.

Mercury Financial Group does not provide tax or legal advice. All clients are urged to seek counsel on such matters.

Year-End Planning Suggestions

Year-End Planning Suggestions

Year-End Planning Suggestions

It’s nearing the end of the year and with the recent market drops and volatility getting your clients worried, we have some year-end planning suggestions that can be win-win’s.

We can help with innovative planning strategies that can protect your clients’ assets, while still allowing them access to these assets.  This can also better prepare them for their planning needs in 2019.


  • When asset values drop, suggest that your clients consider making gifts of these “beat up” assets to their children, grandchildren or a trust for their benefit at this reduced value.  When those assets rebound, the growth will then be in the hands of those who received the gift and that growth will be gift and estate tax-free.
  • Does your client not want to give the asset away because there may be a need for it later?  He or she may be able to make a gift of these “undervalued” assets to a specialized family trust that could provide income and/or principal to the husband or wife during their lifetime but be removed from their estates for estate tax purposes.
  • Also, gifts of these assets can be given upstream from an adult child to a parent to help support them. The parent could will these assets back and when they do the assets will get a stepped-up basis if certain timelines are met.
  • Transfers to GRAT’s and other estate planning vehicles can be incredibly powerful when assets that are currently undervalued are used.  All future appreciation occurs off the client’s balance sheet, can be asset protected and ultimately delivered to future generations gift tax-free.

Contact us for help getting started with any of these strategies, so that we can help you ease your client’s mind and help them continue along the path to achieving their financial goals, even while the market is down.

Mercury Financial Group does not provide tax or legal advice. All clients are urged to seek counsel on such matters.

Retirement Vehicle of the Fortune 500: Deferred Compensation Plans

Retirement Vehicle of the Fortune 500: Deferred Compensation Plans

Years ago I saw an eye-catching financial stat, oddly enough, in a Physician’s magazine.  The stat was in an article promoting the use of “deferred comp” plans for doctors.  In essence, the article was imploring physicians to use the very same retirement vehicle the Fortune 500 use for their senior executives: deferred compensation plans.

The specific stat said that 86% of Fortune 500 companies have a deferred comp plan (NQDC) and that a whopping 98% of those plans use a specific type of life insurance.  That may elicit a big, “Huh?” from many, but it didn’t surprise me at all. Why? Because I knew the Fortune 500 had long ago done their homework and determined that insurance was far and away the most efficient and effective tool to use for retirement planning.  It is the only asset that can provide:

  • Tax-deferred growth
  • Possible tax-free income
  • Tax-free benefits when the person passes away

No other asset offers this!

The KEY, and this is critical.

The key is to design the Plan so that it uses the minimum amount of insurance allowed.  That way, only a very small piece of the annual contribution goes toward the cost of insurance.  The rest grows tax-deferred and then later can come out tax-free.

The article was, therefore, imploring doctors to use this exact same strategy for themselves.  Set up their own.  We call these Personal Retirement Plans, PRP®’s.  PRP®’s are not bound by ERISA regs, so they can design the PRP® any way that they want.  They can exclude who they want from it and even implement a PRP® just for themselves.

Fast forward to the recent Forbes article, “The Rich Man’s Roth” and you can see that anyone can have the same chassis and engine that the Fortune 500 uses.  Subsequently, we have seen an explosion in the PRP® space with clients taking advantage of this powerful tool to drive their own tax-free income stream.

Like all things, it doesn’t work for everyone.  It’s my opinion that if someone has less than 9 years or so to retirement, this likely isn’t the train to get you there.  But if a person has at least 10 years to go, can contribute at least $25K/yr, they will find this asset is a very powerful tool that can drive tax-free income.   A CPA friend of mine put it like this: that’s income that will never see a tax return.  This means it is income that will not drive the client into a higher tax bracket in their retirement years and will not affect their Social Security etc.

The Rich Man’s Roth, as Forbes called it, is pretty accurate because like a Roth, this will drive tax free income.  But unlike a Roth, a PRP® has NO contribution limits.

So, ask yourself, “Which of my clients would benefit from this great strategy?” Fill out our contact form for help getting started.

Mercury Financial Group does not provide tax or legal advice. All clients are urged to seek counsel on such matters.



In case you missed it:

.Here is a recent success story utilizing this Plan:



Want more information? Here is a video we created on Personal Retirement Plans, PRP®’s




Planning in 2018: Now What?

Planning in 2018: Now What?

The tax law passed at the very end of 2017 has left many clients and advisors wondering about current estate planning needs:

  • Now what?
  • Does it affect me?
  • Do I need to take action regarding my planning?

The short answer is – probably!

We work with wonderful clients who think that once we’ve helped them craft their plan to achieve their dreams, they can just put that plan in a drawer and forget about it.  We always urge them to keep it handy.  As the world changes, their needs will change and therefore their goals will change.  Their plan is not meant to be “one and done.”  Think of it like a living document.

And, amazingly, a vast majority of high net worth clients have not done as much planning as you’d expect. Outside of a will, or maybe some basic living trust, they’ve gone no further.  And worse, even that limited planning likely hasn’t been updated in years!

Why is that a problem?  Well, does it take into account the huge changes one can leave their surviving spouse?

A quick illustration of where a review can change everything:

For many years, wills were written to say: “I want to leave the maximum amount allowed by law to my spouse to be placed in a Credit Shelter Trust.”  Sounds great right?  Well, the amount one can leave has gone up over the years from $600,000 to $1,000,000 to $3.5MM to over $5MM to now over $11 million.

So, what if their estate is worth $7 million?  Based on the above-outdated language, the will directs that the maximum amount allowed by law be passed to the spouse in that Trust….But wait.  That means their entire $7MM estate will be placed in Trust since the current law allows for up to $11.18MM.

Is that what you wanted??  Very likely not. It was likely written when the exemption amount was only $1 million, or even $600K.

Point of all this is that planning is critical. Planning brings peace of mind. Planning allows YOU to achieve your dreams.  It’s your plan.  You can design it any way you like. The key is to do the planning!

And that’s where we come in to help! Are you ready to review your client’s current plans and make sure they are up to date and still working towards their goals?  Have your clients done enough planning thus far?  Fill out our contact form.

Mercury Financial Group does not provide tax or legal advice. All clients are urged to seek counsel on such matters.

Estate Planning and The Forgotten Client

Estate Planning and The Forgotten Client

Estate Planning and The Forgotten Client

Over the past several years we’ve seen the estate tax exemptions jump from $1 million per person to now, temporarily, over $11 million per person.  Consequently, many estate planners have seen their practices scale back significantly because these larger exemptions translate to fewer people needing to do traditional estate planning.

But, that doesn’t mean these clients still don’t need planning of some sort.

Because of these exemptions increasing, we’ve seen clients with net worth’s in the $3 million to approximately $8 million range being left on the planning sidelines.  And yet, these clients need and deserve attention as much as any other clients.

In fact, it’s often these clients who are quite fearful of outliving their retirement nest egg and/or not being able to leave some sort of legacy.  Furthermore, they have grave concerns about the cost of care as they grow older.  Long-term care is front of mind for these clients.

Because of these fears, they end up not being able to enjoy their retirement for fear they will either run out of money or will spend it all on long-term care, essentially wiping out any chance of leaving a legacy.

Thankfully, there is a solution.

The Legacy Wealth approach solves all of these needs by providing financial security to these clients and to their heirs. How does it work?

Very simply, we reposition assets to acquire a life insurance asset for the benefit of both the clients AND the heirs.  It benefits the clients today because we design the coverage so that it provides ample LTC coverage, as well as a tax-free benefit to the heirs when the clients pass away. The insurance can be trust owned or owned individually.

The funding of the insurance is quite flexible. It can be paid in 1 lump sum or paid over 5, 10, or 20 years or even for a lifetime.  There are inherent advantages and disadvantages as to how long to fund, which can be addressed with each client.  But the end result is that funding the insurance asset does not impede on their lifestyle in retirement.

So, in the end, we have provided a substantial legacy to the heirs no matter how small the nest egg may have shrunk to at the client’s passing.  We have secured vital long-term care coverage for the clients so they can rest assured the cost of care will not bleed down their assets.  And, maybe most importantly, we have given the client’s peace of mind to know they can truly enjoy their retirement years without worry.  And that benefit clients tell us – is priceless.

The image below illustrates just how much life insurance can impact your net worth and preserve your legacy.  Click the button below, to see the details of how we arrived at this comparison.

Are you ready to discuss solutions and re-engage your “forgotten clients”? Fill out our contact form.

Mercury Financial Group does not provide tax or legal advice. All clients are urged to seek counsel on such matters.

Importance of Policy Analysis

Importance of Policy Analysis

3 Reasons to Do A Policy Analysis

That You Likely Have Never Been Told

1. Almost 2 in 5 policies are “orphaned”. This means they have no one watching over their performance. This is dangerous because life insurance is an asset that needs managing, just like any other asset. Without proper management a policy could lapse, wiping away thousands of dollars of cash value and possibly millions in coverage for loved ones.

2. 1 in 5 policies is on “automatic premium loan”.
What is that? That’s a feature ostensibly designed to be helpful but can inadvertently cause a taxable event for your client. If a client misses a premium payment on a policy with the automatic premium loan, it will kick in taking a loan for the premium due from the cash value. This is fine until the policy lapses and the entire loan amount becomes taxable to the client. OUCH!

The potential liability that the Policy is either underwater or due to lapse: studies show as many as 45% of policies are underperforming or scheduled to lapse. This could be a huge problem for your clients and they don’t even know.


But don’t fret. We can help you and your clients. However, the key is to act NOW vs. waiting. A troubled policy doesn’t get better, it only gets worse. Give us a call to discuss how we can help analyze your client’s coverage to ensure they’re on solid ground.

Are you ready to discuss solutions and re-engage your clients? Fill out our contact form.

Mercury Financial Group does not provide tax or legal advice. All clients are urged to seek counsel on such matters.



And now we take action, right?  What am I talking about?   I’m talking about (finally) taking action on your planning.
For the past 2 years we’ve heard countless clients say, “Hey, I get it. I know I need to do my estate planning but I’m not doing anything until I see what the tax law will be.”  Well, now we know.

What we know is:  the estate tax did not go away. 

So, even with a Republican-controlled House, Senate, and White House the estate tax still did not get repealed.  Most experts agree, given those circumstances, that this was the best chance of ever getting it repealed.  These same experts now agree, that the tax is HIGHLY likely to be with us for a long time given the above.

So, what does this all mean?

Most estate planning attorneys agree that life insurance is an effective part of any quality estate plan.  Generally, the insurance is used as a very efficient means to pay the estate tax.  Think, paying it with pennies, not dollars.  Clients who have been presented insurance as part of their plan, but who held off waiting out the tax law change, now need to move forward.  As we all know, insurance does not get cheaper as you age.  So, the time to act on this really is now.

Some good news: although the estate tax did not go away, we were given a window to do some very exciting things that we won’t be able to do in just a few short years.  The tax act gave us double the gift exemption.  So, instead of $5.49 million to gift per person, we now have close to $11 million to gift.  However, this window closes in 8 years, if not sooner.  Therefore, most planners, attorneys, and ourselves included are urging clients to take advantage of this incredible gifting opportunity by taking action now!

On top of that, the rates the IRS publishes for planners to use with various trusts, GRATS, CRT’s etc. are slowly rising.  These rates have been at historic lows for almost a decade.  That window seems to be closing as the experts predicted and these interest rates will continue to rise making planning strategies that use these rates less attractive.  Said another way:  Time is running out.

Next Steps? 

Your next step is to go back to every client who has been sitting on their hands these past 2 years and re-engage them.  Your Mercury Planning Specialist is here, as your go-to planning partner, to help guide you and your clients on the proper path to accomplish all their goals.

Further Reading – The Power of Life Insurance: The Impact of a Tax-free Death Benefit

Are you ready to discuss solutions and re-engage your clients? Fill out our contact form.

Mercury Financial Group does not provide tax or legal advice. All clients are urged to seek counsel on such matters.

Legacy Plan Assets in Today’s Investment Environment

Legacy Plan Assets in Today’s Investment Environment

Expert Dan Mythen, CEP, offers considerations for Legacy Plan Assets in today’s investment environment

What are the considerations in choosing an asset to pass on to heirs in today’s environment?
High net worth clients that plan to leave a legacy should consider how assets perform in terms of taxes, liquidity, market risk, leverage, and guaranteed values.  Below, I discuss the pros and cons of stocks, Funds/ETFs, Municipal Bonds, Partnership, REITs, LLC shares, Annuities, and Life insurance.  I will not address qualified plan assets or IRAs as they are generally not allowed to be owned within an irrevocable trust.  I have also left out real estate as a standalone asset but it might be part of an LLC, REIT or Partnership share.

First off, let’s assume that the client has done some advanced estate planning and that the assets we discuss below may be gifted into an irrevocable trust.  This trust structure currently avoids state and federal estate tax at the time of the grantor’s death along with asset protection.

Liquidity within the trust may or may not be important.  The trust might also have the capability to make distributions or loans to the beneficiaries for certain circumstances.  Liquidity may also come into play, such as in a trust, where the grantor would be the husband and the non-grantor wife could receive distributions for health, education, maintenance, and support for her ascertainable standard of living while the husband/grantor is still alive.  This is sometimes known as a spousal lifetime access trust or S.L.A.T.

Several high net worth clients have enjoyed recent record gains in their stock positions.  Is this a favorable asset to pass on wealth?
As most advisors are aware, stocks enjoy a stepped-up cost basis upon passing to the next generation so there is no capital gains tax upon sale of that asset when sold by the beneficiary.  Many high net worth clients have low-cost basis highly appreciated concentrated stock positions that may have been stock awards from their employers.  (See case study comparison at the bottom of the article)

  • Taxes – Enjoys stepped up cost basis at death
  • Liquidity – Very good unless no market exists to sell
  • Market Risk – Variable
  • Leverage – Generally accepted as collateral for securities based lending
  • Guaranteed Values – None

Would Mutual Funds or ETFs work well as a legacy asset?
They provide professional management and diversification.  The same “Tax Drag” on capital gains and income apply to funds and ETFs.  Some ETFs, Mutual Funds, and Managed Accounts intend to be “tax-managed” so as to not generate a large 1099 of reportable income to the trust.

  • Taxes – Enjoys stepped up cost basis at death, may have high annual income and capital gains
  • Liquidity – Very good unless restricted
  • Market Risk – Variable. Diversified as they typically manage a basket of stocks or/and bonds
  • Leverage – Generally accepted as collateral for securities based lending
  • Guaranteed Values – None except possibly index option protection strategies

What about Partnership, REITs or LLC shares?
These may be popular assets to gift into an irrevocable trust.  If it is a family-owned business (entity), the shares may be highly illiquid and might qualify for a discount against gifting limits for lack of marketability (liquidity), and entity controlling shares.

  • Taxes – Enjoys stepped up cost basis at death if able to be sold. Qualified distributions treated currently at the same rate as capital gains which is 20%
  • Liquidity – Poor unless entity is sold and shares become liquid. REIT has more liquidity
  • Market Risk – Variable, dependent on performance of entity or real estate
  • Leverage – Difficult to get loan on a non-traded share
  • Guaranteed Values – None

How do taxes effect the decision on which type of asset is placed within a trust?
Currently, all income from trust assets is at the highest rate of 39.6% income tax after only $12,500 of income.  So owning assets that generate a lot of current income would probably not be the best choice.   Assets may also be exposed to capital gains tax of 20% after $12,500 of income if sold before transferred to the next generation.

If I want to avoid taxes, what about owning Municipal Bonds?
Municipal bonds have always been a popular planning asset for clients wanting to avoid income taxes.  As we have been in extended low-interest rate environment, the current yields on all bonds are historically quite low.  A 20 year AA-rated municipal bond has an average yield of about 3.5% today. Widely traded bonds are liquid if there may be a need for the trust to disperse cash during the life of the grantor/client.   Any gain would be subject to capital gains tax.  There may also be more interest rate risk in owning bonds in today’s environment.  A common rule of thumb is for every 1% rise in interest rates, a 20-year bond loses about 15% in market value if sold.  Is this an acceptable risk for a low yield/return?

  • Taxes – Enjoys stepped up cost basis at death
  • Liquidity – Very good unless restricted
  • Market Risk – Variable with interest rates or creditor default
  • Leverage – Generally accepted as collateral
  • Guaranteed Values – Depends on Municipalities ability to service debt /pay interest on bond

Okay, then what about Annuities?
Annuities are great vehicles for accumulating tax-deferred wealth that is meant to be spent during one’s lifetime.  They are generally poor wealth transfer vehicles and rarely if ever owned by an irrevocable trust.

  • Taxes – No stepped up cost basis upon death. Income from annuities is taxable at ordinary income rates unless annuitized.
  • Liquidity – Good unless restricted
  • Market Risk – Variable or Fixed dependent on underlying investment. Diversification in subaccounts
  • Leverage – Might be accepted as loan collateral
  • Guaranteed Values – Possibly

What about Life Insurance?
Life insurance has always been a popular vehicle for wealth transfer.  It provides liquidity shortly after the time of death which can meet monetary demands or help the family business continue without financial stress.  It helps avoid a “fire sale” of other assets.  As mentioned above, if held within an irrevocable trust it escapes all income and estate tax.

  • Taxes – Death benefit is always income tax-free and if in an irrevocable trust, is also estate tax-free. Withdrawals from policy cash values are generally tax-free.
  • Liquidity – Generally cash values as withdrawal of basis or/and loans.
  • Market Risk – Variable or guaranteed values available.
  • Leverage – Very high for death benefit in early years and reducing as time goes on.
  • Guaranteed Values – Guarantees on cash value but more importantly guaranteed death benefits now available up to age 120.

Example of comparing two assets for efficient wealth transfer:

Bob and Linda

  • Married, Good Health.
  • Both age 60 with two adult kids.
  • Current annual income over $470,070.
  • They are at the highest current income and capital gain tax rates apply.  39.6% income and 20% capital gain.  (At 35% bracket and below, capital gain tax would be 15%.)
  • Net Worth over $10 million.
  • $1 million position in Apple.  Assume a zero cost basis.
  • 5/30/17 price of Apple was $153. 5 year high is $156.

Option A:
They sell their Apple position and pay a 20% capital gain tax to net $800,000.  They then gift that amount to the Bob and Linda irrevocable trust.  The trust purchases a survivor universal life policy with a guaranteed death benefit of $3,387,926.

  • Taxes – $200,000 at highest capital gain rate of 20%. Death benefit is entirely tax-free
  • Liquidity – Little as this policy design favors a higher death benefit versus a liquid cash value
  • Market Risk – Guaranteed by the carrier
  • Leverage – 4.23 to 1 return leverage on inception. (3,387,926/800,000) May be acceptable loan collateral
  • Guaranteed Values – Guaranteed death benefit to age 120

Option B:
Gift the $1 million Apple position to the revocable trust.

  • Taxes – Annual dividends taxed at 20% No estate or capital gain taxes if held to death of grantors
  • Liquidity – Very good
  • Market Risk – Variable / Non-Diversified
  • Leverage – Typically accepted as loan collateral
  • Guaranteed Values – None

To equal the guaranteed amount provided by the insurance from day one, the Apple stock price must go from the current price of $153 to $518.  Is that realistic?  Option “A” retains another $200,000 of gifting ability.  If trust liquidity is not a goal, the insurance looks to be the better option.  With a single policy on Bob and Linda in similar trusts, there would be more liquidity at the first death.  A combination of both asset types may be appropriate.

As tax laws, life situations, market conditions, and family dynamics are ever-changing, it makes sense to tailor an efficient wealth transfer strategy that provides the right balance of flexibility, tax protection and asset protection.  The assets earmarked for wealth transfer should be analyzed based upon tax treatment, need for liquidity, potential market risk, leverage and available guarantees.

About the Author:
Dan Mythen has been securities licensed since 1984 and has spent the first half of his career wholesaling equity and bond funds through top financial advisers.  He brought to market the first Washington-only municipal bond mutual fund while at MFS.  The latter half of Dan’s career has been concentrated on planning options for efficient wealth transfer of assets for high net worth and ultra high net worth clients.  Dan has been associated with Mercury Financial Group for the past four years and is available for consultation with advisors and their high net worth and ultra high net worth clients.  Dan makes his home in Redmond Washington with his teenage son Kellan and enjoys fishing, hiking, flying his pet drone and yoga.

Ready to learn more? Fill out our contact form.

Mercury Financial Group does not provide tax or legal advice. All clients are urged to seek counsel on such matters.

Q&A: Life Insurance and Estate Planning

Q&A: Life Insurance and Estate Planning

Expert Bruce Rothbard, CLU®, ChFC® answers questions on incorporating life insurance into estate plans

How is life insurance utilized as an estate planning tool?
Because both federal and state estate tax laws are ever-changing, liquidity is essential for HNW clients. Life insurance provides instant liquidity for estate plans and also provides the best leverage of annual exclusion gifting (currently $14,000 per individual). Estate tax bills are due within 9 months of death. Avoiding a fire sale of assets to come up with the liquidity necessary to pay for estate taxes, along with the extra income tax burden, is easily accomplished with life insurance.

Who should incorporate life insurance into their estate plan?
Ironically, life insurance makes sense for any individual, whether they have an estate tax issue or not. Life insurance is incorporated for the sole purpose of leaving a legacy for loved ones. Its many uses such as business succession planning, legacy planning, charitable planning, supplemental retirement income, asset protection and many others make it a very good alternate asset class for consideration.

What are some of the risks involved and how can they be avoided?
The life insurance industry and its products have evolved. There have been many recent changes in internal costs associated with declining interest rates and other internal factors. You must do periodic reviews to ensure policies issued years ago are still on track to perform as anticipated. Another looming problem can be the individuals acting as fiduciaries (trustees, attorneys, accountants, etc.) who rarely review policy specifications to ensure they are on track with the policy owner’s original assumptions. Utilizing an advanced life insurance planning specialist helps avoid and sometimes completely eliminates any potential risks associated. An objective specialist stays up-to-date on the latest life insurance products and strategies and will properly perform periodic policy review for clients.

How can advisors provide life insurance solutions to their high-net-worth clients for estate planning?
Each client is different and requires their own customized strategy such as premium financing, private financing, charitable planning, legacy planning, income replacement or business succession planning. A quality life insurance specialist can implement different techniques based on each individual client’s goals to avoid tax ramifications.


What are the most common misconceptions you see about life insurance and estate planning?
One of the most common misconceptions is that life insurance is difficult to understand when it is simply another class of asset. In estate planning, life insurance is the equivalent to a stock or bond. However, it has significant tax advantages such as tax deferral, asset protection and creditor protection that other assets do not. Another common misconception is that life insurance is somewhat complex, but in the hands of an expert is can be as simplistic as other asset classes.

How should advisors address client life insurance policies if estate tax laws change?
As indicated previously, ongoing policy reviews are imperative to keep in line with the ever-changing estate tax laws, both state and federal. Under the worst-case scenario, all estate tax laws are repealed. That simply means your heirs will not need the liquidity to pay taxes, they will simply receive more inheritance estate tax-free. Even the worst-case scenario is still a positive.

If estate tax laws change, does it mean that life insurance will no longer provide tax efficiency and immediate leverage?
No, life insurance is still an extremely effective asset for the benefit of heirs. Hence, the reason so many estate planning attorneys recommend life insurance in a quality estate plan. The general characteristics of life insurance, regardless of possible tax law changes, still make it a very viable asset class to have in your portfolio.

Ready to learn more? Fill out our contact form.

Advanced Strategy Spotlight: Leveraged B Trust

Advanced Strategy Spotlight: Leveraged B Trust

How life insurance can help increase value and allow more assets to pass to heirs

What is a B Trust?
A “B Trust” (or Credit Shelter Trust) is a common estate planning technique describing a trust designed to make maximum use of the estate tax exemption available. It is a trust established at the death of the first spouse funded with the exemption amount allowed under current tax law. A B Trust is typically used as a strategy for clients with primary goals of ultimately passing assets to their children or heirs while allowing the surviving spouse and/or trustee use of the trust income for lifestyle purposes if needed.

See the Advantages of a Leveraged B Trust vs. a Regular B Trust

Although using a B Trust is an effective strategy for clients, it does come with some key disadvantages. Trust assets are subject to various taxes on income the trust receives, there is no step-up in basis at the death of the surviving spouse and assets can be subject to fluctuations in value due to market volatility.  Is there a better way to pass these assets on to the heirs, shut off the tax problem and get a step-up in basis on the assets? All it takes is repositioning of the assets (or part of the assets) into life insurance inside the trust. By doing so, the client can achieve possible benefits such as:

  • Shutting off all taxation as the insurance is a tax deferred asset
  • A step-up in basis at death
  • Significantly more proceeds to the heirs through the leverage of the assets via the insurance death benefit
  • Stability from market fluctuations
  • A guaranteed amount of proceeds at death

Typically, when an advisor shows a high-net-worth client the option of doing nothing and continuing down their same path versus the leveraged B Trust strategy, the answer is obvious. Most affluent clients see the B Trust assets as money for their children because the surviving spouse has plenty of other assets to cover living and lifestyle expenses. This concept can be an ideal solution to maximize what a couple’s heirs receive while providing extra assets if needed to the surviving spouse and minimizing taxes.

Are you ready to get started with this solution? Fill out our contact form.

Success Story: Split Funded Defined Benefit Plans

Success Story: Split Funded Defined Benefit Plans

SFDB Plan Success Story Highlights

  • The clients made a $641,000 contribution gaining a $289,000 tax savings (45% tax bracket).
  • The plan added $1.5 million of life insurance coverage.
  • The financial advisor will receive at least $381,000 of new AUM each year for the life of the plan, in addition to the life insurance sale.

A few months ago, we discussed split funded defined benefit plans. These plans (also known as SFDB plans or cash balance plans) are possible solutions for successful small business owners or partners looking for large tax deductions and ways to boost retirement savings. When George and Susan needed a retirement and tax strategy, their financial advisor looked to their Mercury Financial Group Planning Specialist who suggested a split funded defined benefit plan.

Understanding Split Funded Defined Benefit Plans

The Clients

Husband and wife, George and Susan (ages 63 and 62), own a successful family business which employs 14 staff including their son and daughter. George and Susan began thinking about retiring in five years and passing the business to their son and daughter.


While George and Susan were eager to retire, they realized that they had reinvested much of the company profits. Because the business was quite profitable, and George and Susan had contributed approximately $600,000 pre-tax per year for 5 years to a custom pension plan, they needed to accomplish the following:

  1. Contributions must be income-tax deductible
  2. Accumulate as much retirement income as possible
  3. Include life insurance as one of the assets to protect the wealth transfer

The Solution

To address their goals, the couple’s financial advisor contacted his Mercury Financial Group Planning Specialist to develop the right solution. The advisor arranged a meeting with George, Susan and the planning specialist to secure an employee census of the couple’s business.

Using the census information, the planning specialist researched options and recommended a split funded defined benefit plan. The specialist and advisor worked closely with a third-party administrator (TPA) to perform the actuarial testing and designed a custom plan which addressed George and Susan’s challenges and concerns.

Custom SFDB Plan Details

The advisor, planning specialist and TPA set up a split funded defined benefit plan add-on to the current 401(k)/profit sharing plan already in place.

An example of how a slit funded defined benefit plan worked for small business owners


George and Susan now look forward to a comfortable retirement, confident they can pass the business on to their children under favorable financial terms, while ensuring sufficient retirement income for themselves.

Benefits Recap

  • In a 45% tax bracket, the $641,000 represented a tax savings of about $289,000 with George and Susan realizing about 94% of the contribution for themselves.
  • The SFDB plan provided George and Susan with approximately $1.5 million of life insurance coverage.
  • In addition to the life insurance sale, the Financial Advisor will receive at least $381,000 of new AUM each year for the life of the plan.

Do you think split funded defined benefit plans might be right for some of your high-net-worth clients? Download this SFDB Plan Client Profile Sheet to find out.

Infographic: Applicable Federal Rates are Rising

Infographic: Applicable Federal Rates are Rising

Intra-Family Loans: A Way to take advantage of low AFR Rates

In 2016, we saw a dip in Applicable Federal Rates (AFRs), which created a huge opportunity for high-net-worth clients to use intra-family loans and other strategies for wealth transfer. AFRs are the lowest interest rates clients can charge without causing a negative gift tax result when making a loan to family members. Intra-family loans allow wealth transfer to younger generations without using up the parent’s or grandparent’s lifetime gift tax exemption.

Rates in 2017 have increased, but are still low enough for HNW clients to take advantage. The time to act is now. As we discussed last year, advisors are missing opportunities for their affluent clients by not taking advantage of low AFR rates. These low rates won’t last.


AFR Rates are still low in April

Don’t wait until it’s too late. Contact your Mercury Financial Group Planning Specialist to find out how low AFRs can benefit your affluent clients through wealth transfer and advanced insurance strategies.

From a Leading Estate Planning Attorney’s Point of View Twin Cities RIA Lunch Seminar

From a Leading Estate Planning Attorney’s Point of View Twin Cities RIA Lunch Seminar

Tuesday, April 25, 2017 from 11:30 AM to 1:00 PM CDT

BLVD Kitchen & Bar
11544 Wayzata Blvd
Minnetonka, MN 55305

Jessica Nickerson
Mercury Financial Group

Join us for lunch at BLVD Kitchen & Bar in Minnetonka to learn how RIAs can best offer wealth planning and wealth transfer to their most important clients. Plus get an update on the latest in tax reform.

Steven Schanker, Esq.
Mr. Schanker is an accomplished public speaker and has lectured in front of both lay and professional audiences on a national basis. He has been retained and continues to be retained by several large financial institutions, including life insurance companies and stock brokerage firms. He is an active member of the Society of Chartered Life Underwriters Speakers Bureau, the Estate Tax Planning Council of Long Island, a speaker at “Top of the Table,” a former adjunct professor at Adelphi University on Long Island, and a quoted author, including articles in Forbes and Fortune magazines.

Advanced Strategy Spotlight: Spousal Lifetime Access Trust (SLAT)

Advanced Strategy Spotlight: Spousal Lifetime Access Trust (SLAT)

What is a Spousal Lifetime Access Trust or SLAT?

A Spousal Lifetime Access Trust (SLAT) is a specially designed irrevocable trust for married clients. When properly structured, the trust keeps assets including life insurance proceeds outside of both spouses’ estate, while allowing the trustee to access the trust’s assets and policy’s cash value for the benefit of the non-grantor spouse. After the non-grantor spouse’s death, the trust property can then be distributed to other beneficiaries such as children or grandchildren.

How does a SLAT work?

Diagram of how a Spousal Lifetime Access Trust (SLAT) works

Download the SLAT Strategy Sheet

What are the Possible Advantages of a SLAT?

Having Your Cake & Eating it Too

This type of trust has become popular in large part because it allows a client to do key planning, while still providing flexibility and access to the assets in the trust. Yet, the trust partitions the assets out of the estate for estate tax purposes.

Donor Peace of Mind

Knowing that gifts to the trust could possibly be recovered if circumstances change can increase client comfort level with the gift.

Increased Financial Security for Non-Grantor Spouse

The fact that the spouse’s distribution rights last for life means potential access to trust’s assets continues, even if the donor dies.

Possible Tax Advantages

Properly drafted and properly implemented by an attorney, a SLAT can provide a family with federal income tax and federal estate tax advantages.

A SLAT is Ideal for Married Couples who:

  • Are typically age 40 and older
  • Have assets for retirement, but possibly desire more
  • Have strong relationships and no chance of divorce
  • Have an insurable grantor
  • Share wealth transfer goals between spouses

Possible Disadvantages of a SLAT:

  • The non-grantor spouse could die first
  • The couple could divorce and upset the workings of the SLAT

Are you ready to start working on this strategy with your affluent clients? Contact us today. 



Top Myths of not Offering Planning & Insurance

Several years ago, a branch manager asked me to come present to his top advisors with a specific topic he already had in mind. He said, “rather than discuss some advanced wealth management planning technique, I want you to talk about the top reasons financial advisors do not do planning and insurance business.”

Because this is my area of expertise, I was a little underwhelmed and responded sheepishly, “gee, I can hardly wait to talk about why people would not want to work with me.” He laughed and told me to trust him.

I’m glad I did. The meeting went extraordinarily well, and I learned a lesson. There are indeed some myths out there about this segment of our industry. I’ve now made that same presentation many times to several firms across the country, and it is always well received.

In this article, we’ll address those top reasons financial advisors not do insurance business and hopefully dispel some of the myths associated with those services.

#1:  My Clients Aren’t Interested in Talking to Me about Planning and Insurance

Numerous studies have shown that in fact, high net worth (HNW) clients do indeed want to talk with their financial advisors about planning and insurance. If you are their trusted advisor, they look to you for this advice. They do not look to their attorney, their CPA or their insurance agent for this.

They want advice from their financial advisor. That means an even more powerful connection can be made with your best clients because you’ll learn about their goals, desires and wishes. As their advisor, you’ll learn what’s most important to them, and they will be enormously grateful.

#2: I Don’t Want to Look Like I’m Pushing Insurance on My Clients

I totally understand this one, but if you’re working with the right planning specialist, you will never be viewed by your clients as pushing insurance on them. How’s that possible? By working with an outside specialist, you will be positioned as the objective advisor. This is key.

When a planning discussion turns to insurance, the specialist will smartly position the financial advisor on the same side of the table as the client. It’s a subtle yet powerful dynamic. The specialist will be presenting to you as much as the client. As the specialist makes recommendations, the client will be listening along with their financial advisor.

Once the specialist leaves the room, the client will look to you as their financial advisor and ask your opinion. Never once will the client feel you were pushing them. Instead, they will feel you are objective and the one they look to in selecting the appropriate choice on the insurance.

Again, it’s a subtle thing. But so many financial advisors we’ve worked with have seen the power behind this approach and swear by it.

#3: I Don’t Understand Insurance

Over 80% of financial advisors have never dropped an insurance ticket. That’s a pretty staggering number. Consequently, there is not a great deal of experience out there in this area of wealth management. It’s only human nature. If you don’t understand something yourself, you’re certainly not going to be the one to bring it up to your best clients.

This is yet another reason why financial advisors should consider partnering with a planning specialist. Think about it. You have specialists in all major areas who you lean on in investing and asset management. Because you can’t know everything, you need and rely on these people.

The same applies in the planning and insurance world. It can be complex, but if you’re working with the right specialist, they bring that additional needed expertise. Specialists know how to navigate the minefields. They have a network of estate planning attorneys they can recommend to your HNW clients, know how to navigate the world of insurance underwriting and paperwork and understand which trusts are appropriate for each situation and which are not. The list goes on and on.

While on the outside, insurance may appear to be overwhelming. That’s why working with the right specialist in the planning and insurance arena is the key. Just as you work with the specialists in the investing area, you can work with the right planning specialist in insurance.

#4:  Insurance Products are Confusing

Insurance products are only confusing if one doesn’t dig a little deeper. With the advent of so-called guaranteed policies, insurance products have become much simpler. And of course, simpler is always better.

A guaranteed product boils down to this: the premium, the years of payment and the death benefit are all guaranteed. That’s it. End of story. It doesn’t get much simpler than that.

However, insurance products go much further than that, but don’t have to be confusing. The right specialist should be able to explain how particular insurance products work in plain, simple terms that anyone can understand. If they can’t do that, they are the wrong specialist.

Also, the real experts out there, design insurance strategies with a very conservative approach. That way the benchmarks or bogies the policy must hit to perform are low. Which translates to no surprises for the financial advisor or the client down the road.


No longer is the wealth management world as simplistic as it once was. Back in the day, your broker did stocks and bonds, your CPA did taxes, your attorney did legal work and your insurance agent did insurance. Now, all of these people are in the asset management business, gunning for your clients’ assets and trying to find ways to set themselves apart. So often, they use “planning” as the angle to capture your clients.

So many financial advisors have learned that one of the best reasons to offer planning and insurance as part of their business is defense. “Defense” meaning that it walls off outsiders trying to poach their best clients. They also learn that while this side of the business offers many benefits to their affluent clients, it also brings many benefits for the financial advisor and their practice. These benefits include:

  • Building tighter relationships with their best clients
  • Uncovering additional AUM by going through the planning process
  • Making introductions to the next generation (who will be inheriting this wealth)
  • Increasing referral opportunities

What is probably most significant to financial advisors when calling in a specialist to provide planning and insurance strategies, is that their clients see them in a new way. Clients see not just an asset manager, but a true, objective financial advisor.

Contact Your Specialist

Advanced Planning Strategy Spotlight: Split Funded Defined Benefit Plans

Advanced Planning Strategy Spotlight: Split Funded Defined Benefit Plans

A wealth management solution for small business owners

Very often small business owners are looking for retirement planning options beyond a 401(k). They want a retirement plan that provides them, as the owner, substantial contributions for themselves, but also tax deductible contributions. A Split Funded Defined Benefit Plan (also known as a SFDB Plan or Cash Balance Plan) can be an ideal solution for owners or partners of successful small businesses seeking potentially large tax deductions, combined with the ability to supercharge their retirement savings.

SFDB plans are like an old-fashioned defined benefit plan with one difference. Plan contributions are split between life insurance and other investment options (stocks, bonds, mutual funds, CDs, etc.). These plans benefit a business because employer contributions decrease the annual tax liability for the owners or partners. SFDB plans can be added to an existing 401(k) and profit sharing plan, specifically to address the needs of the high-income business owners or partners.

Split Funded Defined Benefit Plan Benefits

  • Can create some of the highest tax deductible contributions of any retirement plan type
  • Can drive significant retirement income for the owner(s) and also select key employees
  • All assets in the retirement plan are protected from creditors under current federal law
  • When combined with life insurance provides the ability to address financial, estate, and tax planning needs on a pre-tax basis
  • Provides business owner’s family financial protection in the event of the business owner’s pre-mature death
  • The ability for the corporation/partnership to determine individual contribution amounts for each owner
  • Business continuation and succession options
  • Flexibility in investment and product choices

Split Funded Defined Benefit Plans may be Appropriate for clients who:

  • Are owners or partners of a successful business with a consistent profitable history
  • Own a business with has sufficient budget to cover annual contributions
  • Have fully funded all other qualified retirement options
  • Own a business has fewer than 50 employees


Do you think you have clients who should be using this strategy?

Download our SFDB Client Checklist to find out.

Infographic: 2017 Brings a Jump in AFR Rates

Infographic: 2017 Brings a Jump in AFR Rates

Have Clients Take Advantage of Low Rates Before Year End

Applicable Federal Rates (AFRs) are the lowest rates clients can charge family members without causing a negative gift tax result when engaging in intra-family sales or making intra-family loans. Financial advisors can incorporate strategies for high-net-worth clients with these types of sales or loans that can create:

  • Huge opportunities to transfer wealth via rate Arbitrage
  • Ways for high-net-worth clients to transfer assets to family without generating Gift Taxes OR Generation Skipping Taxes (GST)
  • Options to shift wealth when clients have either used up their lifetime exemptions and/or want to be able to unwind the strategy in the future

The IRS has published AFRs (applicable federal rates) for January 2017. We saw these rates take a substantial dip in August, and while still low throughout 2016, rates will increase substantially in 2017. It important that clients who should take advantage of low interest rates act immediately. Take a look at the ARFs throughout the year below.

January 2017 AFR Rates

Download this Graphic