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ADDCALC: ILLUSTRATION TIPS
 PENSION ESTATE MAXIMIZATION

Annuity Estate Maximizer | RRIF Estate Maximizer | Insured RRIF

View sample PDF illustrationAnnuity Estate Maximizer

For the older client with surplus taxable retirement income. This concept provides a tax effective program to maximize bequests.

How to create the optimum illustration

This illustration is exactly the same as the Income Shelter. The text is slightly different because it targets retirement income that is not needed to live on. It should be used only for retired prospects. Note that it accommodates life pay scenarios only. If you want to illustrate quick pay, use the Income Shelter. For the concept to illustrate well you must use maximum funding for life.
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View sample PDF illustrationRRIF Estate Maximizer

For those with surplus RRIF income and who wish to transfer some RRSP capital tax-free to beneficiaries on death.

How to create the optimum illustration

ADDCALC features two RRIF illustrations; each one aimed at a different market. The RRIF Estate Maximizer targets RRIF plan holders who are receiving income in excess of what they need to live on. If they are only withdrawing the minimum RRIF income allowed, they are probably good prospects for this concept. Often, even the minimum income is not needed and is invested instead for unforeseen future circumstances. The money usually ends up in the estate and if this is the case, it would have been far better to invest the money in a maximum funded universal life policy instead, as the illustration shows.

ADDCALC does some impressive internal calculations to assist you with your illustration. If you know the amount and number of premiums that your prospect is able to afford, all you need to do is run the product illustration and call up ADDCALC. The Basic Information screen that comes up after you select the RRIF Estate Maximizer will tell you what amount of money in the RRIF plan accommodates the premiums. You can change that amount by selecting "Specify RRIF Premium" under "Options" and entering a new amount in the "RRIF Single Premium" field. Next, click on "Calculate Insurance Premium", and a window pops up that will give you the new annual premium and the premium paying period for a new product illustration to run through and sent over to ADDCALC.

The illustration compares the value to the estate of investing the minimum payments from the RRIF amount that you have identified in an alternative investment with investing premiums from the same RRIF amount into an exempt life insurance policy. It shows the difference to the estate between the two investment approaches and illustrates it graphically.

The illustration works best for prospects between 65 and 75, male or female or joint last-to-die. Quick pay can be used but you'll note that for an effective illustration you will have to use at least 15 years. To compare favourably with the alternative investment, the tax rate should be at least 40%.
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View sample PDF illustrationInsured RRIF

Preserves the value of a RRIF for the estate at death of the insured by insuring the tax on the RRIF balance. The program calculates the amount of insurance needed and compares the values of the estate of an insured and uninsured RRIF.

How to create the optimum illustration

The Insured RRIF targets different prospects than the RRIF Estate Maximizer. It is for prospects who need most of their RRIF income to support lifestyle needs but who are willing to give up part of that income to insure that the full RRIF "principal" will go to heirs. It is done by taking out Term to 100, or minimum funded universal life with level T100 mortality charges, to cover the tax liability on the RRIF balance at death. If your ADDCALC is bridged to product illustration software that cannot produce proposals for Term to 100 coverage, you can still create an illustration by using minimum funded universal life. In either case, after you have created the product illustration, call up ADDCALC and select Insured RRIF from the "New" menu and the program will take you to the Basic Information screen. Enter your prospect's tax rate and fill in the fields under "Illustration Information" and click on "View". Click on "Next Page" until you get to the last one and note the column "Tax On Balance At Death". It shows the tax liability on the RRIF for each year to age 100. Select the amount that you want to provide coverage for and go back to your product illustration software. Run through a new life illustration for the amount you selected and transfer it back to ADDCALC. Fill in the blue fields that are blank, view your illustration and, if everything is in order, print it and present it with the product illustration.
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Annuity Estate Maximizer | RRIF Estate Maximizer | Insured RRIF
 

 
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