16 Selling Points: Why Accountants Prefer Indexed Universal Life

[Tampa Bay Rep]

Here's information that could be used as selling points for indexed universal life sales from an article on 16 reasons why accountants prefer indexed universal life to mutual funds

ProducersWeb - 16 reasons why accountants prefer indexed universal life to mutual funds

 

[VolAgent]

Re: 16 Selling Points: Why Accountants Prefer Indexed Universal L

My only contention would be, the proper title is "16 Reasons Why Accountants Should Prefer Indexed Universal Life to Mutual Funds"

Most accountants hate cash value life insurance because they don't understand it.

 

[BNTRS]

Re: 16 Selling Points: Why Accountants Prefer Indexed Universal L

Dude isn't securities licensed and it shows:

Unless held in a qualified plan, mutual fund gains are annually reportable and taxable, thus denying an investor the benefits of such three-fold compounding.

This is incorrect. Mutual Funds are taxed when sold as a capital gain, meaning if you haven't sold it there is no realized capital gain. The dividend is fully taxable as income, unless it's a muni-bond fund, at which point in time the dividend is not subject to federal income taxes and sometimes not state income taxable, capital gains are completely taxable.

There's a big and important distinction between gain and dividend on a mutual fund.

Unless held in a qualified plan, mutual fund gains are annually reportable and taxable, thus denying an investor the benefits of such three-fold compounding. Although qualified plans are a better choice than non-qualified plans, they still have issues not present with an IUL. Investment choices are normally limited to mutual funds where your account value is subjected to wild volatility from exposure to market risk.

This is also incorrect. There are limits, first trigger would like (but not necessarily) be the MEC limit. Then the DEFFRA and TEFFRA limits for reclassification from a life insurance contract to an investment as a result of violating either the CVAT or GPT for life insurance. This would certainly put a major cramp in his plan if violated.

Policy owners may access their money from an IUL without IRS penalty regardless of age. Qualified plan withdrawals prior to age 59 1/2 are subject to a 10 percent penalty in addition to being taxed as ordinary income for the year the withdrawal is take.

Also not 100% accurate. One can withdraw money from a "qualified" plan for under certain "hardship withdrawals" and by starting 72(t) distributions. Certain qualified plans also offer loan provisions, they aren't great, but they do avoid penalty.

When the markets take an extended downturn after several years of sustained growth (as they did in 2000-2002 and again in 2008), fund managers will often resort to selling appreciated stocks purchased several years earlier in order to generate gains to offset those losses. This has the effect of minimizing the fund’s published loss-in-value at year end, allowing the fund to claim that it was “only” down, say, 9 percent on the year while its peer group was down an average of perhaps 17 percent.

The unsuspecting shareholder of this fund receives his Dec. 31 statement; sees his account is down 9 percent, and assumes incorrectly that “at least” he’ll owe no taxes on his “loss” come April 15; three weeks later, he receives a Form 1099-Div from his mutual fund company showing several thousand dollars of reportable income.

This was a good point, and one of the big reasons I hate mutual funds.

So some of it good, a lot of it kind of iffy. This is the typical crap on producersweb.

 

[Tampa Bay Rep]

Re: 16 Selling Points: Why Accountants Prefer Indexed Universal L

Thanks for contributing your input. You make some very good points.

 

[indexedannuity_girl]

You should read my comments on that article which is posted at Producers Web. There were tons of inaccuracies and misleading statements made in the article.

Bottom line is that this product is invaluable, but everyone needs to properly understand it. It is LIFE INSURANCE, not an alternative to investment products. sjm

 

[Norwayguy]

Re: 16 Selling Points: Why Accountants Prefer Indexed Universal L

Dude isn't securities licensed and it shows:



This is incorrect. Mutual Funds are taxed when sold as a capital gain, meaning if you haven't sold it there is no realized capital gain. The dividend is fully taxable as income, unless it's a muni-bond fund, at which point in time the dividend is not subject to federal income taxes and sometimes not state income taxable, capital gains are completely taxable.

There's a big and important distinction between gain and dividend on a mutual fund.

I'll admit I did not read the article but based on the title I would assume an accountant was the author and if he is screwing up the taxation part you know he will be ripped to shreads on the life insurance portion.

 

[DHK]

Uh... have you forgotten about capital gain distributions?

Capital Gains Distribution Definition | Investopedia

But other than that, I agree that there are a LOT in accuracies in this article.

 

[nu79]

Re: 16 Selling Points: Why Accountants Prefer Indexed Universal L

An indexed universal life policy account value can never lose money due to a down market,

Not only do mutual funds not provide this safety from market declines, but an investor can lose substantial portions of both principal and past earnings during a market downturn often requiring extreme market gains just to get back to even.

Read that several times, and when you are done read it again

 

[RyanCO]

There are times that cash value life insurance is appropriate for my advisory clients, especially when they have had experience with it in the past. For example, the young lady who realized that, when I was describing how CVLI works, realized that her dad put her through college by accessing his WL policy. It was actually a touching moment, I probably won't forget it.

CVLI is life insurance, first and foremost. Is it an "investment"? No. But it is an asset, and that can be important in the big picture of a client's portfolio.

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