ADDCALC:
ILLUSTRATION TIPS
PENSION ESTATE MAXIMIZATION |
Annuity
Estate Maximizer | RRIF Estate
Maximizer | Insured RRIF
Annuity
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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RRIF
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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Insured
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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