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Taxation and Life Insurance

Thursday, November 28th, 2019

Taxation and Life Insurance

What is it?

Life insurance has long been recognized as a useful and relatively simple way to provide for your heirs and loved ones when you die. If your survivors relied on your income during your lifetime, then they will be able to avoid financial difficulties after your death if your life is adequately insured. Lawmakers have long recognized the social usefulness of life insurance, which helps protect widowed spouses and children and keeps them off of public assistance. Accordingly, lawmakers have historically provided liberal tax benefits as an incentive to those who put their hard-earned dollars into life insurance policies. Favorable tax treatment also extends to accumulations within certain cash value life insurance. Generally, when you pay premiums on a cash value life insurance policy, some of your money is applied toward the policy cash value, which is similar to a savings account within the policy. Over time, cash values accumulate tax deferred as long as certain requirements are met. During your lifetime, you can access the cash value by a withdrawal, policy loan, or surrender (cancellation) of the policy. Caution: If the policy is classified as a modified endowment contract (MEC), withdrawals, including loans and partial surrenders, will be subject to immediate taxation to the extent that the policy’s cash value exceeds the premiums paid. In addition, withdrawals from a MEC made prior to age 59½ may result in a 10 percent penalty, unless an exception applies.

Why do you need to know?

Whether you are purchasing life insurance to protect your family, as an investment, or both, the tax treatment of your policy will directly affect the return that you (or your heirs) get from the dollars you deposited with the insurer. In most cases, your insurance agent or accountant will be able to tell you everything you need to know about the taxation of your policy, but if you are involved in portfolio planning or product comparisons, you may want to become more familiar with the tax rules so that you can draw meaningful conclusions.

How is life insurance taxed?

In general, life insurance death benefit isn’t taxed, but that is hardly the end of the story. Familiarity with some of the basic rules will help you avoid traps for the unwary and plan accordingly.

First, it has to be life insurance…

Life insurance provides you with many tax advantages, but only if it falls within the definition of life insurance for federal income tax purposes. If the terms of a life insurance contract do not meet the statutory definition of life insurance, then you are not entitled to the special income tax treatment.

Income tax considerations…

In most cases, premiums are paid with after-tax dollars. Typically, death benefits are received tax free by your beneficiaries after your death, but the sale or surrender of your cash value policy during your lifetime triggers a tax on realized gain.

Tax-free buildup of policy value…

The cash buildup within permanent or cash value life insurance is not subject to income taxes if certain rules are met. There are a few rare–but important–exceptions.

Taxation of dividends…

A certain type of permanent cash value insurance, whole life insurance, may pay dividends to policy owners out of the insurer’s surplus earnings for the year. Whether you take the dividends in cash or keep them on deposit with the insurer, they are considered a return of your premiums. As long as you don’t get back more than you paid in, you are merely recouping your costs, and the dividends are not included in income. Dividends in excess of premium payments, however, are generally taxable as ordinary income. Dividends paid by mutual life insurance companies do not qualify for capital gains tax treatment.

Taxation of benefits…

Benefits can be characterized as living benefits or death benefits. The tax treatment of benefits varies depending on who receives them and how and when they are distributed.

Taxation of policy exchanges…

The tax code allows you to exchange one life insurance policy for another life insurance policy without triggering current tax liability. However, tax-free treatment will apply to an exchange only if it satisfies certain requirements.

Contact Beck Insurance Agency today for more information.  Call 419-446-2777, or click here.

Source:  Dixon Wells

Kylie Schultz attends CIC in Baltimore.

Wednesday, November 20th, 2019

Kylie Schultz, (personal lines, farm, and life agent at Beck Insurance Agency), is in Baltimore, Maryland finishing up the last day of her first CIC institute, Personal Lines.

There are seven* CIC institutes. Each institute is 2 days of coursework (16 hours total), followed by a 2-hour essay exam that is required only if obtaining the designation. The CIC program is a continuing education program and a professional certification program. Any eligible individual may attend classes without taking the examinations or working toward the designation. Courses reflect the laws and regulations in the state in which the institute is held.

  1. Personal lines institute addresses the insurance needs of individuals, families, and family members, and explains the complexities of state-specific personal lines forms.
  2. Commercial casualty institute covers Commercial General Liability, Inland Marine, Ocean Marine, Business Auto, Commercial Umbrella/Excess Liability coverages.
  3. Commercial property institute covers ways to maximize coverage for various types of commercial property accounts.
  4. Life and health institute provides the basic, essential background knowledge for property and casualty agents to succeed in the life and health insurance market.
  5. Agency management institute covers the internal operations and factors necessary to run an agency. A case study is used throughout the program for practical application of the theories, methods, and procedures.
  6. Commercial Multiline covers Commercial Inland Marine Concepts & Coverages, Crime Coverages & Endorsements, Cyber Exposures and Coverages, Employment Practices Liability Insurance, Excess Liability/Commercial Umbrella Coverages
  7. Company Operations covers Executive Strategies, Regulation & Compliance, Actuarial Practices & Accounting, Product Development, Agency/Policyholder Services, Underwriting, and Claims

To become a designated CIC, the candidate must complete all five courses and pass the examinations within five calendar years. CIC designees make a commitment to update their CIC designations annually.

A CIC candidate may earn the CIC designation by completing any four CIC institutes plus one Certified Risk Managers (CRM) course. CIC and CRM designations can be earned by completing nine programs: any four of the CIC institutes and all five CRM courses (Principles of Risk Management, Analysis of Risk, Control of Risk, Financing of Risk, and Practice of Risk Management).

Kylie joined Beck Insurance in June of 2016 and became licensed in Property & Casualty a few months later. Kylie initially focused on customer service and has now transitioned into a sales and consulting role, focusing on personal lines Home, Auto, Umbrella, Recreational Vehicles, Farms, and more.  Email Kylie today at kylie@beckinsurance.com, or click here to request a quote!

Today’s Advanced Trucking Safety Techniques

Tuesday, November 19th, 2019

If you have been in trucking for a while, you have seen many changes to safety technology through the years. These safety products promise to make your operation safer, with fewer accidents and downtime. So, why aren’t all carriers investing in the latest in fleet safety technology? As you might expect, the answer to this question differs by motor carrier.

If it were an easy decision, every carrier would be purchasing all the advanced fleet safety products on the market today. But every operation is unique, with its own combination of safety problems, driver concerns, maintenance challenges, equipment upgrades, and CSA scores to address, while also keeping the bottom line in mind. With the trucking industry operating on historically thin margins, any expenditure on upgraded or new technology will likely have to consider its return on investment (ROI)—whether it will make the company safer and more competitive or just add cost. Other issues include the time to install new systems, employee training, and the expected shelf life due to advancing technology.

These technologies are expected to have longer staying power in the industry than others:

  1. Disc brakes
  2. Collision mitigation technology
  3. ELD/driver scorecards/GPS/truck cameras
  4. Trailer tracking and temperature monitoring
  5. Operations software, dispatch, dynamic routing, and maintenance

This article will review Collision Mitigation Systems (CMS), which have come a long way since their early introduction.

“It’s getting to be more and more the norm that fleets are adopting collision mitigation systems, said Art Trahan, Ryder’s Senior Manager assigned to national accounts. “I don’t think we’ve pushed over the 50% mark because, like everything else, there’s a cost involved.”

While collision mitigation systems often share common features such as an integrated camera, radar, and braking systems, they may utilize different operation methods, including:

  • The collision mitigation system identifies a potential crash situation with a vehicle or obstacle ahead by using combined camera and radar data to generate an early prediction of the situation and allow for a reduction in the vehicle’s speed
  • Stationary vehicle braking (SVB) assists the driver when approaching a line of stopped traffic. Combining the use of radar and camera data to confirm the object ahead, the system alerts the driver and begins to slow the vehicle.
  • Other systems use smart cameras to read the posted speed limit and compare it to the actual vehicle speed. Depending upon the speed threshold set, the system will alert the driver and, if high speed continues, alert the motor carrier.
  • Adaptive cruise control and braking is designed to help the driver maintain a safe following distance. When the distance between two vehicles becomes too close, the adaptive cruise control system provides driver warnings and can take action, including applying the brake, to achieve a safe distance.
  • Some systems combine radar and camera components to create lane departure warnings. These alerts signal the driver of potentially hazardous situations and, if continued, send the alert back to the motor carrier.
  • Other systems offer a form of driver coaching and training to address undesired driving practices.

Regardless of the system you choose, safety technology can help your company’s bottom line. It can help drivers avoid crashes or reduce severity. It can also provide driver coaching and instill good habits among drivers. With fewer accidents, a fleet will achieve lower accident-related costs and less downtime of equipment and drivers, helping to improve driver morale and often increasing fuel savings.

Posted by Cliff J. on July 18, 2019 in Trucker Focus

References:

https://www.ttnews.com/articles/collision-mitigation-advances

A NECA split dollar arrangement offers business owners a sophisticated life insurance solution

Tuesday, November 12th, 2019

For successful business owners, purchasing life insurance with corporate dollars can be an effective way to protect their family or to recruit and reward key employees. The following case study shows how a business funded a large life insurance policy through a Non-Equity Collateral Assignment (NECA) split dollar arrangement.

Case Study:

•Male, preferred non-smoker, owns a 45% interest in a C corporation that generates solid annual revenue.
•He wants to provide a minimum of $3M death benefit indefinitely to protect his family, within the following parameters:◦Using cash from the business to pay the premium, with the business recouping its premium cost upon the business owner’s death
◦Wants the business to cover the business owner’s personal tax cost, if any, during the premium-paying period (15 years)
◦Exiting the arrangement at the business owner’s retirement (age 65)
◦Using the policy cash value to pay any personal tax due upon the exit from the arrangement

The Plan:   A NECA Split Dollar Arrangement

How it Works:

•Split dollar is a term used to describe an arrangement in which a life insurance policy’s premium payments and benefits are split between two parties. In a split dollar arrangement, one party has a life insurance need and the second party has the funds to pay for the policy.
•Under a Non-Equity Collateral Assignment (NECA) split dollar arrangement used in this case, the business pays the annual premium for a life insurance policy, which is owned by the business owner.
•The policy is pledged — via a collateral assignment — to the business as security for repayment. Under the terms of this agreement, the business is required to be repaid the GREATER of the premiums paid or the cash value.
•The death benefit in excess of the repayment amount is paid to the policy beneficiary.
•In this case, the business will also pay any income tax charged to the business owner on the “economic benefit” costs associated with the trust’s share of the death benefit via an additional cash bonus. (Fundamentally, a NECA arrangement works very much like a conventional loan but with economic benefit costs in lieu of loan interest.1)
•At retirement, the NECA agreement terminates, and the business decides to waive its right to repayment (aka releases the assignment). The business owner uses policy cash value to pay the tax on the forgiven debt.

Why it Works:

•Business owner secures his life insurance death benefit goal of $3M in all years using money from the business to pay the premium.
•The business owner’s tax on the economic benefit cost is lower than the tax on the annual premium.
•The policy cash value does not exceed the total premium paid while the agreement is in place.
•The life insurance policy can support a distribution from the policy cash value to pay the business owner’s tax due on the release of the collateral assignment.

The Result:

When a business owner client has a life insurance need—or when they want to retain/reward a key employee — using corporate dollars through a NECA Split Dollar arrangement can provide a valuable benefit.

Source:  John Hancock

Call Beck Insurance Agency at 419-446-2777 for more information or submit a request here.

The Value of Life Insurance

Monday, November 11th, 2019

We know how important it is to seize the moments and live your best life now.  But don’t forget to protect the financial future of the people who depend on you.  One way to get started is with life insurance.  It can help provide for your love ones when they need it most.  How?  By helping to pay off your mortgage and other debt.  Cover college expenses.  Providing cash to settle your estate.  And more.  Plus, life insurance can also offer you living benefits, like helping you pay fewer taxes in retirement, be prepared for the cost of an unexpected illness, or boost your financial portfolio.

Most people recognize the value of life insurance but more than 40% of Americans don’t have it.  And of those who do, almost 20% say they don’t have enough.  So what’s stopping them?  Most people overestimate the cost of life insurance by more than three times the actual cost.  Life insurance comes in many shapes and sizes and we are here to help you find the right solution for your needs and budget…and protect the life you have built.  Ready to get started?  There is no better time than now.  See how much coverage you need at principal.com/lifecalc.

Or, contact Beck Insurance Agency today.  Call 419-446-2777, or click here.

ANNUITIES UNDERUTILIZED FOR TAX-FREE LTC BENEFITS, DATA SUGGESTS

Thursday, November 7th, 2019

About 18 percent of all U.S. households own a deferred annuity, estimates the LIMRA Secure Retirement Institute, yet data suggest many annuities will never be activated for monthly income, leaving potential tax consequences for beneficiaries.

Many of these individuals can benefit by learning more about exchanges under Internal Revenue Code section 1035 of the Federal Tax Law, which can offer tax benefits for beneficiaries as well as provide tax-free long-term care (LTC) benefits, should they be needed.

“Americans have nearly $3 trillion in assets in fixed and variable annuities,” said Chris Coudret, vice president and chief distribution officer at OneAmerica®1. “Annuities can be a more versatile way to provide income during retirement than many people – and financial professionals – realize.”

A new consumer resource, Guide to Long-Term Care Planning Using 1035 Exchanges, explores the basics of how 1035 exchanges can benefit individuals and includes several real-life scenarios.

“The Pension Protection Act (PPA) provides meaningful tax- and long-term care planning advantages to consumers,” said Jesse Slome, director of the American Association for Long-Term Care Insurance (AALTCI), publisher of the guide. “Few people are familiar with this provision, which encourages individuals to plan for the possibility of needing additional income to cover LTC needs.”

Among other provisions, the PPA enables income tax-free withdrawals from specific annuity contracts that pay for qualifying LTC expenses or LTC insurance premiums. This includes fixed interest annuities with LTC benefits, such as OneAmerica annuity-based hybrid LTC protection.

These annuities provide tax deferral and non-LTC liquidity, while offering a guaranteed payout benefit and the option for lifetime LTC benefits. If policyholders don’t utilize their full LTC benefits, a death benefit passes to the named beneficiary. They can be purchased for a single person or shared between two people, and premiums won’t increase. For more information about OneAmerica LTC solutions, visit www.oneamerica.com.

Repositioning assets to take advantage of the PPA is relatively simple, Coudret said. Under section 1035, an existing annuity can be exchanged into a new annuity on a tax-free basis, so all one needs to do is transfer all or a portion of the existing annuity into a hybrid annuity product featuring LTC protection.

“This new guide can be a tremendous help to financial professionals looking for information and resources for their client conversations,” said Coudret.

Tammy Lieber, Senior Public Relations Manager, 317-285-1462

1 Table 25, Year-End Deferred Annuity Assets by Market Type, U.S. Individual Annuity Yearbook – 2016, LIMRA Secure Retirement Institute, 2017.

# # #

About OneAmerica®

A national leader in the insurance and financial services marketplace for more than 140 years, the companies of OneAmerica have helped customers build and protect their financial futures. OneAmerica offers a variety of products and services to serve the financial needs of their policyholders and customers. These products include retirement plan products and recordkeeping services, individual life insurance, annuities, asset-based long-term care solutions and employee benefit plan products. Products are issued and underwritten by the companies of OneAmerica and distributed through a nationwide network of employees, agents, brokers and other sources who are committed to providing value to our customers. To learn more about our products, services and the companies of OneAmerica, visit OneAmerica.com/companies.

OneAmerica® is the marketing name for the companies of OneAmerica. AALTCI is not an affiliate of the companies of OneAmerica. Provided content is for overview and informational purposes only and is not intended as tax, legal, fiduciary, or investment advice. This information is not designed to promote nor to endorse 1035 exchanges. Before using a 1035 exchange carefully weigh all the benefits, costs, and implications of replacing a policy.

Products issued and underwritten by The State Life Insurance Company® (State Life), Indianapolis, IN, a OneAmerica company that offers the Care Solutions product suite. All guarantees are subject to the claims paying ability of State Life.

*On July 20, 2017, State Life was rated A+ (Superior) by A.M. Best. This is the second highest of 16 possible ratings assigned by the agency.

CDL Drug and Alcohol Clearninghouse

Friday, November 1st, 2019

The CDL Drug and Alcohol Clearinghouse is a new tool to improve highway safety that will be operational on January 6, 2020.  The goals of the clearinghouse, established by the FMCSA, are two-fold:  (1) to efficiently identify drivers not permitted to operate commercial motor vehicles due to drug or alcohol violations and (2) to provide access to real-time information ensuring that drivers receive the proper evaluation and treatment before resuming their driving duties.

Employers will be required to check the clearinghouse for current and prospective drivers’ drug and alcohol violations before permitting those drivers to operate a vehicle.  In addition, employers will annually need to check the clearinghouse for each driver they employ.

Drivers will be able to voluntarily registering in the fall.  They need to keep in mind that starting January 6, 2020, drivers who want to change jobs will be required to be registered in the clearinghouse as part of their employment-related background check.

To learn more about the clearinghouse, visit https://clearinghouse.fmcsa.dot.gov/

Cliff Johnson, Acuity Trucking Consultant

4 Tips to Organize Your Garage for Winter

Friday, October 25th, 2019

I probably don’t have to tell you this, but winter isn’t too far away. That means more temperate weather for our friends in the south—and cold for our friends in the north. No matter where you live, you can use these simple tips to help organize your garage.

Store chemicals.

Heading into the winter months, if you live in an area that freezes, it is a good idea to store items that can freeze. If your garage isn’t insulated, these items can be brought inside and stored in the basement. Just be sure to keep chemicals out of the reach of children and flammable items away from heat sources.

Hang gardening tools.

If you don’t keep up with putting tools away after a project, now is the time. Hang your gardening tools to keep them out of the way and safely out of reach.

Clear a spot.

The garage is often a dumping ground for all sorts of things. Take a day or a weekend to empty the garage, and only put back the things you need. If you have other options for storage, there may be a better place for those summer toys or the lawn mower. While everything is out, be sure to blow or sweep out the garage too.

Utilize the space.

While you are limited by the size of your garage, you don’t have to be limited by its storage potential. Many items can be hung up over the winter months. Use wall hanging systems and even the garage rafters or attic space to get things up off the floor and away from salt or melting snow.

Do you have any DIY garage organization or storage tips to share?  Original content provided by our friends at Acuity Insurance Company.

Need a home or auto quote?  Call Beck Insurance Agency at 419-446-2777, or click here!

Salon Booth Renter Insurance – $250 / yr

Wednesday, October 16th, 2019

Are you a hair stylist? A beautician? Are you required to carry your own liability insurance?

Finally an easy, local, affordable market for booth renter insurance…right here!

Beck Insurance Agency can quickly provide salon booth renters the coverage they need, at an annual premium of $250.  Packages include $1,000,000 in beautician professional liability, $1,000,000 commercial general liability per occurrence, $2,000,000 commercial general liability aggregate, business personal property of $10,000, and a $10,000 business income limit.  Additional coverage may be added at an increased cost.

What do we need from you?  All we need is your name, location & mailing addresses, a phone number, an effective date, and your payment information.  That’s it.  Quick, and easy.

Contact Beck Insurance Agency today to secure or replace your beautician liability coverage today.  You can call us at 419-446-2777, email us your details at help@beckinsurance.com, or submit your information here and we will get you set up quickly.

 

How surprised would you be if you went to buy the new iPhone expecting to pay $1,000, but it only cost you $200? You’d be ecstatic!

Tuesday, October 15th, 2019

How surprised would you be if you went to buy the new iPhone expecting to pay $1,000, but it only cost you $200? You’d be ecstatic!

This happens all the time with 44% of millennials overestimating the cost of life insurance by 5x the actual amount. A policy through @PekinInsurance is simple, affordable, and possibly life-changing for your family.

⇢ Send us a message and we’ll review your needs!