2017-tax-changes-for-life-insurance

By: Sam Kaufman
Partner, Agent Support Group

A new beginning is upon us as we enter 2017….

A new President will take over the reins of our government promising changes, many of which may have profound effects on our industry, some positive and some negative.    While the banter about Estate Taxes gets most of the headlines, the life insurance industry overall may be the beneficiary of many of the changes being proposed.

Estate Taxes always seem to grab the biggest headlines, but in the past trade-offs such as, ending the stepped up basis, have ended the discussion and Estate Taxes have remained, albeit targeted at a very small percentage of Americans.    It is likely, that the fight to extinguish Estate Taxes will have the same historic ending it has in the past.    Of more concern are changes in 1031 and 1035 Exchanges.   Can you imagine the impact of gains in annuities and life insurance no longer being sheltered when exchanged for a like-kind.    This would obviously have a major effect on future sales as we have always counted on being able to shelter the gain when replacing a cash value life insurance policy or rolling over an annuity.   Be on the lookout for these changes which tend to appear only in small print, these would be the true “Death Taxes”.

The biggest proposal is to reduce the corporate tax rate, a potential bonanza for life insurance sales.    For years, advisors have tried to devise techniques to make life insurance premiums tax deductible.  Those of us who were around in the heyday of Sec. 79 clearly remember the bonanza.    If the corporate tax rate is reduced to 15 – 20%, the need for “tax deductibility” becomes less significant leading to an increase in non-qualified plans, split dollar and other life insurance concepts utilizing corporate dollars.  It also would not be surprising to see more corporations electing “C” status as opposed to “S” to take advantage of the spread between the personal and corporate tax rates.

It is important that we all stay tuned as our new President enters his first hundred days.    This is usually a time when the Houses of Congress tend to be favor a new President and given the majority of both Houses being Republican many tax reforms will be given a fast track.  We can count on business expansion, leading to perhaps the most favorable employment figures in decades.   Need we forget the DOL legislation which affect all those selling annuities. This will lead to more people needing advisors to guide them on how to provide for their families and future supplemental retirement benefits.

Get up to speed on new life insurance products that can provide a myriad of solutions from Long Term Care to Supplemental Retirement Benefits.    Get familiar with indexed based products that offer true crediting transparency.   Upward trending interest rates will have a positive effect on products using “New Money Crediting” as opposed to “Portfolio”.   We are here to assist you in navigating through what promises to be a very exciting year.  A year filled with many new opportunities for you as advisors to bring to your clients.    Don’t be left at the station as this turbo charged train pulls out.

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