It's Life Insurance Awareness Month! Evan Roberts joins us on the podcast this week to discuss how life insurance works and when the right time to own it is. No one really wants to talk or think about life insurance, but if someone depends on you financially, it's a topic you can't avoid. Evan breaks down the the different stages of life where it may be beneficial to own a policy from just getting married to owning a business.
This podcast is for informational purposes only. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice. StatonWalsh and Founder’s Financial Securities do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.
Ryan Staton is an Investment Advisor of, and securities offered through, Founders Financial Securities, LLCMember FINRA/SIPC and Registered Investment Advisor.
Devin Walsh is an Investment Advisor of, and securities offered through, Founders Financial Securities, LLCMember FINRA/SIPC and Registered Investment Advisor.
Check the background of this firm on http://brokercheck.finra.org/
Hello everyone. And welcome to this week's episode of wealth builders presented by StatonWalsh. We have a very special episode coming your way this week, and we are kicking off life insurance awareness month with a great guest and partner of ours, Evan Roberts from Chesapeake brokerage. And we're gonna be talking to Evan about all things, life insurance, talking about why life insurance is important in the different stages of life, whether you're just getting started in your career. If you're married in retirement, if you're a business owner, so we hope you enjoy. And if you like the episode, please like, and subscribe.Speaker 2:
This is wealth builders presented by StatonWalsh, a show designed to pull back the curtain of the financial industry and bring true transparency to the forefront of conversation. On the show. We cover topics like financial education, current events, and interview business leaders and industry experts. With the ultimate goal of helping listeners discover their own path to financial independence.Speaker 1:
Hello everyone. And welcome to this week's episode of wealth builders today. It's gonna be all things. Life insurance, cuz it is life insurance awareness month and we have Evan Roberts, a great partner of ours, who we go to for all things, life insurance. So Ev, welcome to the show today.Speaker 3:
Thank you so much. I've been waiting patiently to get on this great podcast. I appreciate it.Speaker 1:
And I , I know this is a , a big moment for you. I know you've been, you've been begging us for a while and say , you know what I mean ? This guy is all things, life insurance. So what a better time than right now to talk about. I know . So today we're really talk about life insurance in all different areas and aspects of life, whether it's in your twenties, your thirties and retirement as a business owner. So maybe start talking about what life insurance is first and then what are the purpose of it of ,Speaker 3:
Yeah, it's a great question. Not only is it life insurance awareness much , but being in the financial planning world, obviously we talk about life insurance every day. And so we really see insurance utilized as a tool for, like you said, twenties, thirties in retirement and life insurance in its most basic sense is really a vehicle for protection to protect you, your family, your loved ones, your business partners against an unexpected loss or passing and provide those people in your close knit circle with the financial means to Excel in life, after an untimely passing or a timely passing of somebody that they love. And so insurance, although it can be used in a lot of strategic ways and we can get very creative with it in its most pure sense. It's really designed to be there for protection to protect you, protect your family and to protect your assets in the most efficient way.Speaker 1:
Awesome. Well , appreciate the, the quick little overview there. So let's jump right in about the different stages of life and why life insurance fits in. We, we have some 20 something year old clients who are successful they're entrepreneurs and not married yet. No kids. And they're always like, no , why the heck would I buy life insurance and 26 years or older and 27, whatever it may be. Well , I have life insurance in your mid and early, late twenties when you don't have kids, you might not be married. So what , what , what's the purpose ofSpeaker 3:
That? Yeah. Yeah. It's, it's a great question. And to start before kind of answering that question, I think you guys more than I being in the financial planning world, when you bring on new clients, whatever stage they may be in , but we'll use that example. You're not only really helping them with their financial goals, financial planning and financial goals are the crux or the starting point of all the planning that you guys do. But I think on top of that, it's really, you're helping them implement a strategy to really live what their life goals are. And financial planning is a great way to start that off, to start that journey in figuring out what they want for their life, right? Whether it is to own a business one day, have a family one day, whatever it may be. And so not only are you helping them implement a strategy to get to retirement, but you're helping them implement a financial strategy to live out and meet and exceed the goals that they have just for their life in general. So if you've got a young person who you've taken on, you might be trying to just implement some financial planning strategies to get them started in a financial planning journey and where insurance I think fits in that is they may have goals to have a family. One day, they may have a goal to get married. One day, they may have a business that they have. They may have debts that they've incurred student loans or a mortgage credit cards, car payments, whatever it is, a loan to start a business and insurance being something that provides a tax free lump sum at your passing can be used in a situation like that, to make sure that your family members or those that you have in your close circle are protected against your untimely passing to pay off those debts, to not be encumbered by those loans or debts that you may have, or have had at that point in your life. And so it's really, again, in that stage of life, I think therefore protection and it's just there for its most basic sense. And when you think about starting a financial plan before you really start implementing the financial plan for what their goals are for retirement, you have to protect against that. What is the worst thing that could happen? Well, the worst thing that could happen is you don't see retirement. Unfortunately you may pass away early how you protect the loved ones in your close knit circle from that unexpected pass and life insurance is just simply the most easy and efficient and cost effective way of doing that. I know that you guys see this on a pretty regular basis as well with someone young who doesn't have a family , uh, I think it's kind of hard to sell them on the idea of buying insurance at a young age to protect their income for a potential family. If somebody at that age is doing very well for themselves, we can even start the conversation or go down the road of utilizing the tax efficient benefits of accumulating assets inside of an insurance policy or accumulating cash, I should say, inside of a life insurance policy. But I'd love your guys thoughts on that as well. I mean , yeah ,Speaker 1:
Let's definitely, let's talk , let's talk about that . Let's talk about what that really means accumulate cash in there. Cause one of the things I always thinking about locking in shareability and at a young age is people like just , just straight term insurance straightforward as it gets is very cheap in your twenties. You can lock in a lot of coverage for a very small amount of money that could protect you for next 20, 30 years. But one step up from insurance are things like permanent insurance. Like people hear the word whole life all the time, IOLs and next universal life policies. And I think it's a very confusing product and it's great through all areas of life, whether it's your twenties, thirties , forties business owner , or whatever it may be, but starting a product of that in your twenties and at a young age is, could be very powerful and a great way to leverage other assets in the future . So talk to us about what does that look like? What is a Q wealth inside of a policy like this?Speaker 3:
Yeah, it's great. And I think the three of us have a , a pretty similar mindset. It's not for everybody. There's certainly people out there that look to insurance first and foremost. And I think we probably have a reverse mindset of accumulating cash inside of an insurance policy as financial planners. You guys work with clients and first and foremost, you wanna make sure that they're invested well, they're putting money away for retirement, but one great feature that life insurance offers that kind of sets it aside from the other investment vehicles that are out there is the ability for it to accumulate cash on a tax deferred basis and then be accessed down the road on a tax free and actually a non-reportable basis and big caveat. If it's designed appropriately for somebody who is younger and is, has some discretionary income outside of the investing that they are already doing. And the planning that they're doing for you then utilizing insurance, a permanent insurance vehicle to accumulate cash on a tax deferred basis can really set them up to have well rounded retirement from an income perspective. And it also helps in hedging tax risks down the road in retirement. And so if you start very young, I mean, you guys can speak to this. There are pretty much three different types of insurance vehicles that you could utilize to a crew cash value on a tax deferred basis. And those are whole life insurance. Like you mentioned, there are policies that you can get credited and interest rate to your policy based on the performance of several different types of indices that are available most notably the S and P 500, you can also actually have your pick of the litter of a series of many different mutual funds on a variable universal life insurance policy. And so depending on the client's risk tolerance, that would be where we would start with picking an actual product, but they all work in the most basic sense, very similarly, which is the money that accrue inside of that policy can be accrued tax deferred. And when you're ready to take money out of that policy, for whatever reason, it can be accessed on a tax free basis. And when you get to a retirement after all of those, several years of just utilizing the compounding nature of that investment, you can access that money tax free . And so to take a , a look at what that actually means and how that could benefit a client after several years of accruing money inside of a policy, you could utilize that as opposed to , to your taxable investments, the market is down and you need to take money out. You really wanna sell at a loss and incur taxes and then be in the red a little bit. During one year of retirement, you could take money out of a tax free vehicle like insurance and let those other investments recuperate during a down year, as opposed to taking money out of a taxable investment for a down payment on a vacation home, or for college expenses for kids. If you have kids, you can utilize again, a tax free vehicle like life insurance. I think what clients really enjoy about that and the real benefit of it is the flexibility that it provides a client during retirement because of its tax free nature. And it just hedges the other assets and investments that they've accumulated for retirement because of that as well. And I think one thing to not lose sight of is unlike other investments, there's still a death benefit at the end of the day, if you don't ever get to access that money on a tax free basis, and God forbid you do pass away before retirement or just before you've ever accessed that money. Unlike other investments, that death benefit is gonna be probably much larger, if not a little bit larger than the money that's actually inside the investment component of that life insurance policy from a very of its tax free .Speaker 1:
Yes . Sounds like , like a very unique product. And then it's very, I guess , customizable and there's a lot of different uses for it. So I definitely appreciate that. And I definitely thinking certainly when it goes back to compound interest, the earlier start on things, whether it's like you start in an IRA or 401k insurance, it's one of those things that the longer time horizon you have and the more efficient, the better it's going to going to work or the long term .Speaker 3:
Yeah. And there's not really like a perfect time. I would say there's probably a time when it's too late, right. To start a policy like that, talking about compounding interest. But I think, and I'll throw it back to you guys. It really depends on what type of planning that client has already done . Right. Are they putting away money in that Roth higher ? Are they maxing out their company's retirement plan that they have getting match , whatever that is . Have they done everything that you guys have really told them to do and still have money left where insurance made sense to then go and invest premium dollars into. And so whether they're the example we used at the beginning 27 year old with no family, that's a high income earn, or they're hitting their stride in their late thirties when they do have a family, but they still have a discretionary income. There's not really an age where it makes sense to start it so long as it fits that overall financial plan that you guys are helping them with.Speaker 1:
That's great. Ryan is somebody that I know earlier on, before he had, was married or had kids or anything, he was somebody that was a big believer in for himself owning life insurance on his life at a , at a high amount. So Ryan in your mid twenties , like why'd you decide to do that.Speaker 3:
So I think one of the things that we missed as we've talked through this concept is that underwriting is a big piece of this, right? Not everyone can just do all the things that we've talked about . There is a process around qualifying for a life insurance policy , whether it's permanent term insurance, doesn't really matter . It's a great point. One of the, the forethought was that never gonna be younger or healthier than I am today. And when you talk about pricing, Evan , I'll let you kind of get in into the details on this. But when you talk about pricing younger and healthier, you are the better the pricing for a policy like that will look, it also affects accumulation of cash values and all these other pieces. So for me, it was about pre-planning having some for foresight to look into the future and say, these are the things that are going to be important to me one day. But I know that if I get to that point and I'm notable, all of those things that I think I want to do with this particular vehicle are not gonna be available. So that was my thought process. But I want you to touch a little bit on the underwriting process and what, and underwriting really means for life insurance in particular. Yeah. Great point. And like you said, the younger and healthier you are the better time it is to purchase insurance. And at the end of the day, whether you're using it for the basic asset protection, income replacement, whatever it is, term insurance for a death benefit or accumulation at the end of the day, you're buying an insurance policy. You're buying a death benefit associated with this policy for the premium that you're paying. And so not just the premium, but there are costs and fees associated with this type of vehicle that you're purchasing. There is an underwriting process associated with that to be able to qualify for this vehicle that can do so many different things for you and your family and your overall financial plans and objectives. And so when you're young and healthy, it's typically very easy to buy insurance for whatever it is when you start getting older and you have a couple of dings or notches in your health file and your medical records, that's when insurance carriers tend to not like to give you the best underwriting class. And so for underwriting purposes, there's several different ways that you can do it. But at the end of the day, an insurance company is going to view taking you on as a risk to their bottom line, to be able to provide that death benefit to your loved ones. There's a cost associated with it and the cost and how it's made up is how healthy you are and the amount of death benefit that you are buying. They need to assess that in the calculations that they do and spit back out and underwriting classification based upon how healthy you actually are. So the less healthy you are, the higher cost of insurance. And when we talk about compounding interest in buying a permanent insurance policy to accrue cash value, if you are not the healthiest person and the cost of insurance is very, very expensive. It may not make sense from a financial standpoint, to be able to utilize the benefits of the tax deferred nature and tax free nature of an insurance policy like that because the cost of insurance is just too high and it's not going to accumulate the best that it should. And so underwriting plays a huge, huge aspect in implementing these types of plans , because a lot of people think of insurance as a cost and it needs to fit that budget, or it needs to be a certain cost in order to make sense financially, for them to have the amount of death benefit that they need, or to design it to appropriately accrue cash value over the time horizon that they have for it to accumulate until they take distributions or until they take a withdrawal or a loan against that policy. And so the healthier and younger you are, it's much, much easier to purchase an insurance policy. The older and less healthy you are . The insurance companies tend to be a little bit more strict about approving. You are giving you the best underwriting classification.Speaker 1:
Absolutely . I see all the time like people when they need life insurance or want insurance they're later in life, they have kids they're married now. Like , you know what? I think it's time about life insurance now. And we see it all the time. God forbid something happens medically or something happens in the medical records where either it might not get a good rating or then it might be declined across the board. And then their , their , their risk exposure is massive at that point. Cause they don't have this. They can't take their risk and , and give it to an insurance company. It's all on their own balance sheet now. And that's that'sSpeaker 3:
It's and that goes back to your example, dev this 27 year old, they might not have a family and kids that they feel like they need to protect, but they're protecting that insurability. Cause mm-hmm , <affirmative> , you know, we know we've experienced. Anything can happen at any point in life. And it sounds maybe a little insurance salesy, but it's just the nature of the world that we live in. There's so many things that can happen unexpectedly. And Brian's story is kind of perfect. He knew that he wasn't gonna be younger, healthier, and he had these goals. And so he implemented something, thank God he's still young and healthy, but we just never know what can happen. And so that's a huge piece of the planning conversation that I know that you guys don't take lightly because you've lived it, you've experienced it. And you've experienced it with clients and yourselves that you need to have that conversation before it's too late. And unfortunately does happen sometimes when it's too late or it sparks the interest in a client because it happened to a loved one of theirs when it was too late.Speaker 1:
And this is , this is never a fun conversation happens. Even say everything that like , Hey, let's talk about if you might die prematurely in your mid thirties, before you have kids, this is not a fun conversation to have it's it's morbid, but it's something that's important . And it's , and it's so crucial to an overall financial plan. As you know, Ryan, like Ryan's our director of financial plan and this is like, he knows the glue that holds everything together. And the things that can happen if God forbid, whether it's, you know , I know it's life insurance now, but type insurance, this disability, whatever. But Ryan, talk to us a little more about that and like how this is almost like the glue that kind of holds everything together in a financial plan in case something falters or God forbid, something terrible happens before you expect.Speaker 4:
Yeah . So you touched on it earlier. And I think it's something important to , to recognize is that in all insurances at a high level life insurance, your homeowner's insurance vehicle insurance, it's a transfer of risk in your life. It's taking something off of your own personal balance sheet and transferring it to an insurance companies . And so there are certain things in our lives like car insurance, a lot of times it's state mandated. You have to have it life insurance, some of the others that exist. It's not one that anyone mandates that you have, it's 100% a choice. And so that's a choice that you need to make when you're looking at my financial plan, what my plans are today and in the future, what do I need to do to shore that up, to transfer the risk that I'm willing to pay for off of my balance sheet and onto the insurance companies . It's often a question we get too is , and some comments, some feedback, and some people say things like I don't want to be worth more dead than alive. And so one of the things that we focus on a lot is how do we calculate an appropriate amount of life insurance and, and , and Evan, that may be something that you can provide a little, little bit more insight on because we are talking about today, you know , on an educational basis, the different phases of your life and how life insurance can fit in those types of scenarios. But more importantly, talk to us a little bit about how insurance companies determine what level of death benefit, like how much risk are they willing to take off of your balance sheet when you're going through that financial underwriting process?Speaker 3:
Yeah, it's a great question. And I think to add a little bit to what you were saying before, I answer that you guys, as financial planners, kinda like what I said in the beginning, you're not just helping them plan for retirement. You're helping them meet their goals and anything can happen unexpectedly to offset those goals and to transfer some of that risk off your balance sheet to an insurance company's balance sheet can help. You know, if you're not there, if you're not around, if something happens to you unexpectedly and you pass away and you do have a family, or you have a business partner to be able to make sure that they can live out their goals and the goals that you had for your family, your business partner, your closed circle insurance is a great vehicle to be able to do that with, to calculate how much is an appropriate amount. The insurance carriers will literally take a look at your life from a financial and an underwriting perspective to see how much is the appropriate amount, you know, and, and it kind of goes back to what you said. They don't want your family to be worth more when you have passed. And so it's a good point because that's kind of how insurance companies look at it. They are not going to overinsure somebody. And so as financial planners, we have to figure out, you guys have to figure out what that appropriate amount is for your client. And it depends on what aspect of life they're in and what they want to protect. If somebody is in the earlier stages of their life, they're starting a family they're married, or they're starting a business. The big key factors that insurance companies will take into consideration is okay, well , if you have a family and you're the breadwinner, there's a lot of people that have dual income households. Now they still take that into consideration because they need both of those incomes to continue that lifestyle. So they'll take a look at and say, depending on what age you are, a certain amount of years of your income will go into that total death benefit coverage amount so that you're protected. Your family is protected for a certain number of years. If you're young and healthy, they might take a look at your income and say, okay, we can ensure 30 years of that income amount, 20 years of that income amount, the older you get, the less amount of time, they will ensure that income because there's a certain point in time where most people will retire. And they're not gonna ensure that anymore . They'll take a look at any debts that you have under your name . So mortgage being the easiest one to rattle off the top of my head business loans that you have, they'll take that into consideration up to a certain percentage as well. And they'll factor all of that into figuring out what the appropriate death benefit amount is for your client or what they will approve for your client. And in later stages of life, it kind of shifts from income replacement to an efficient transfer of wealth to the next generation, you know, are there going to be taxes that my family will have to pay if I pass away and they'll take that into consideration as well. So there's a lot of different calculations that the insurance company will take into consideration to figure out and approve the appropriate amount of life insurance for your client. And you guys have a great understanding of that as well as the insurance companies. And typically we're not too far off from what is an appropriate amount, but it is. It's always kind of crazy to me that people will come to you guys or myself for insurance and think a certain amount is an appropriate amount. And after having a couple of minute conversation and asking some pretty elementary questions, realizing that they need a lot more than they actually thought they needed. And, and also at a young age, if you're starting a family, a million dollars of life insurance or a million dollars of anything seems like a ton of money. But when you really think about your mortgage and how expensive that is, or if you don't want your husband or wife to have to go back to work, or you don't want them to have to figure out a way to take care of your kids and work and provide an income and keep that same lifestyle that they're accustomed to. That number adds up very, very, very quick. And so that just goes to how important it is to educating clients on the real benefit of life insurance in every aspect of life. Because a lot of people don't know that they need that education. They think they know what life insurance is and exactly how much they need , but until you guys have that conversation with them and they understand what its real value is to them and their financial plan and their goals for their life. That's when you know it really, it really is an eyeopening conversation. I'm sure you guys have that all the time where clients come in and they think they need a certain number. And after a very quick conversation, they're realizing that it's a lot more, but they're okay with it probably most times, cuz they see the value after that educational conversation.Speaker 1:
Yeah , absolutely. I mean you see the numbers, you probably see it in your business. Cause you work with a lot of advisors out there and doing a lot of life insurance, you always hear , oh, half million, million dollars . It's just numbers kind pulled out the sky that , that sounds like good amount. You always say, Hey, I have life insurance through. We have had this conversation the other day. I have a quarter million dollars through my , my wife's work. You know, it's fine until you really show people. That's not that much and how much they really need. Like with all the things you just said F but let's move on to some of the other stages of life real quick. Obviously you're married, you have kids. We know how important life insurance is that stage because we're talking about tuition for kids, making sure they're taken care of whether the father or the mother passes away early and all the things to kind of take care of the family through. We hear all time . I just wanna get , make sure my family's taken care of to age 18. The kids are out of school and it's all good. So let's talk a little more about that stage of life. You have young kids, you have kids waiting until they are a certain age. Why do we need life insurance in that range? And , and what's so important about that.Speaker 3:
Are you saying when you already, when you have kids that are older or there younger kids, you kind of have that young kids,Speaker 1:
New family , young kids.Speaker 3:
Yeah, it's great. And that , that goes back to the beginning of our conversation that we had. It's, it's a very simple calculation. It depends on what they want in life and what they want for their family. And there are, you know, I have two young boys. I want a lot from my family. If I passed away, I would not want my wife to have to go back to work. I wouldn't want her to have that financial burden of trying to figure out how is she gonna pay the mortgage? Where is she gonna go get a job? Where are the kids gonna be taken care of? You know, if my kids want higher education, I don't want her to have to figure out how to pay for that higher education. I want my family not to be better dead than alive. I want to experience all of those things with my family while I'm on this great earth. But if God forbid something is to happen, I wanna make sure that they don't have to worry financially and they can accomplish all the things that I want them to accomplish as well. And so in the most basic form, again, it is income protection, it's debt protection and offsetting any debts. And it's that calculation that we just ran through. And then if you do have, you know, you're at that point in your life, a lot of clients that you guys are working with at that point in their life, you know, let's call it 30 to 40. Maybe their job is they're really hitting their stride , their high income at that point in time, their income's probably growing exponentially. If it's not already at that highest amount of income. And they're probably looking for that alternative investment vehicle where a permanent insurance policy may make sense for them to be able to stash some money, to grow and enjoy the benefits of the tax free and tax deferred nature of insurance. And so at that point in time insurance, we can get very, very creative with, but I think it really boils down to it's a protection vehicle. You're offsetting that risk from your balance sheet to make sure that your family, your loved ones can really complete the goals, not from a financial perspective, but just their life goals without feeling financially encumbered. And I think that's what it boils down to is it's not just money, but it's making sure that your loved ones are taken care of and they don't have stresses. I mean, if any of us think about passing away when we're young and healthy it's devastate, right? So that's a tough time for anybody's family or loved ones or close knit friends. And so to be able to provide them with a lump sum tax free amount of money, whatever that money is that will go to paying off their house or whatever, it may be going into a fund to make sure that the kids can go to a higher education college, whatever it may be, that is a blessing to be able to provide that so that they can live that lifestyle they're accustomed to, and that their world isn't shaken up anymore than it currently is from somebody passing away. And I think that's such an important piece to enlighten clients with is it's not about the money. It's really about making sure that your loved ones are taken care of if you're not there to take care of them anymore. And we talk a lot about like the breadwinners, but it's so important also to talk about if there are dual income households or if there's somebody that stays home with the kids, a spouse that stays home with the kids and making sure that if they pass away that the lifestyle is not rocked as well and making sure that they are insured so you and your family can keep living that lifestyle that they are accustomed to. And I see that all the time as well. I'm the breadwinner comes to you guys and says, yeah , I need life insurance. My wife is fine, or my spouse is fine. My husband is fine. They have insurance through work, how much insurance they have through work. Sometimes they don't even know how much it is. They just know they have insurance. And that's, again, it goes back to educating them on all the great things insurance can actually do to protect them . And at that stage between the ages of 30 and 50, that's when insurance I think can really, really be beneficial, not from a, just a protection standpoint, but from a supplemental retirement vehicle standpoint as well. And you can start really getting creative and then we can launch into business owners and protecting them as well. If you're starting a business, like you guys did utilizing insurance to make sure that if something happens to either one of you, that the other will be okay and can continue servicing the clients that you guys have both worked very hard and invested in and made sure that everybody's taken care of. So it really depends on the client, the situation, their family situation, their business situation, their financial planning situation. And on top of all of that, what they want out of life and making sure that that can be protected.Speaker 1:
Yeah , I agree. And I think we often see really like that people who have kids in the family from age 30 to 50 60, they are very receptive to the idea of life insurance, because they know they need to protect something . They need to protect this lifestyle to make sure their kids are okay. They're spouse is okay. But one of the areas in the stage of life where we see a lot of pushback is in retirement. Kids are outta college, they're empty nesters. Now they're living off their income. Why the heck? You know, my life insurance policy's up, I'm turned 70. I've had this 20 year term life insurance policy is ending in December. I'm not renewing it. I don't need another one. Everybody's good. We have money. We have assets. So why do people need life insurance retirement? And we , we hear it all the time. And , and I would love to hear your opinion on why that is cause we go back and forth.Speaker 3:
Yeah, yeah, absolutely. And I think at that point in time, you kind of have a, well , let's call it a , a matured client, right? They've got the assets you guys have helped them get to a certain point where they're either in retirement or it's right around the corner. And they have this nest day . And what people I think maybe fail to realize is that if there is a nest egg, that's there and you are going to tap into it until it's all dried up on your last day. If something comes into your life and throws a wrench into it that can really derail your retirement goals and objectives, right? Those are supposed to be the golden years. You're supposed to be able to relax and, and live the life that you've always dreamed. And you've worked hard for, to be with your family or whatever those goals and ambitions are after you've worked so hard to get there. And any one thing can really derail that and your family's goals and objectives again. And I think that from when you look at life insurance from a income protection, that's kind of out the window, right? You, you have income protection because if you've accumulated all of these assets already, so you don't need to protect income that you're not making because it's coming in from the assets that you've invested and that you have saved for retirement. And so really insurance, I think at that point in time without getting too into the nitty gritty is for a couple of different things. But I think more than anything, it's for protecting the assets that you've worked hard for. You know, one thing that we talk about the three of us all the time is long term care. Something happens with the client's health that requires healthcare or long term care or them to go into an assisted living facility or to have a nurse at their house for whatever reason, that's expensive and it's only getting more expensive and it can derail those retirement goals and objectives of yourself and of your family very quick. And it can tap that well dry very quickly as well. So I think insurance at that stage of your life is to protect against those assets. If you have a healthcare situation where you need more than what you've saved for, or you're using all of the money you've saved or for the expenses that you are incurring because of your health, you wanna make sure that if you pass away that your family or your loved ones is taken care of. So if you tap that well, dry your nest egg, your retirement assets, life insurance, the death benefit component of that can be there to kind of replenish to make sure that they , again , your spouse, your family , whoever it is , can live the lifestyle they're accustomed to, if you had to utilize it for healthcare . So that's one of the biggest topics I think,Speaker 1:
And not too there too . Sorry to interrupt you. But you may like when we talk about long term care, there's actually life insurance policies that have a long term care component to them. We're gonna actually draw down the death benefit, correct. To use as long-term care , uh, for care . Yeah,Speaker 3:
Absolutely. And when you're talking about long term care planning, you can utilize a vehicle like that, where you can tap into an insurance policy while you're still alive, tap into the death benefit, or you can just buy a long term care policy. But for people that didn't do that, or people that have life insurance life insurance can almost be like a cost recovery tool, right. To kind of the point that I was making is you can have a long term care policy at that point in time, which is insurance, right? So we can talk about it during this podcast. It is an insurance policy that will pay you out a tax free amount of money to offset those costs or to pay for those costs that you incur. But if you don't have a long term care policy or a life insurance policy, you can use as long term care, having a certain amount of death benefit again, just to make sure that if you do have an unexpected healthcare scare or scenario, that takes a lot of the assets outta the equation, because you needed to utilize them to pay for all these expenses, having that death benefit, be there to replenish after you pass away so that your family can live off of that death benefit, or it will supplement. Whatever is left is, is very valuable to have as well. So whether it's a cost recovery mechanism or you've actually implemented a true long term care policy, I don't think that you can go wrong. And again, it's just there for that protection. And then you start getting into the higher net worth arena, and it's not so much for death benefit protection or long term care protection, or making sure your assets are there to live your lifestyle. Your family can live your lifestyle. Then it's really there for making sure that the wealth transfers as efficiently as possible. Right? And so, you know , a lot of clients that built up these nest eggs that are all qualified dollars , maybe they're not gonna use all of their qualified dollars . Maybe they're not gonna use or need any of their IRA or their 401k while they're alive. And we know that with passing qualified monies to the next generation, that certainly incurs a rather hefty tax bill more times than not. And so insurance, a lot of clients utilize insurance to offset taxes. When they transfer wealth, it can be used to leverage, not inefficient vehicles to make them more efficient and make that wealth transfer as easy as possible to give your family money when they need it to pay the Piper. Essentially. I think so we see that as well.Speaker 1:
Yeah, for sure . Cause like what says for the state plan , like the state taxes just never know where that number is going be. I know it's higher now, but we we've seen it much lower in the past. So kind of wanna start wrapping things up here. But last thing I really wanna touch on is let's talk about life insurance for a business owner. You know , you start a business, you have a business, like let's just briefly touch on that. Like why we talk about human and we talk about buy , sell . I don't wanna go too deep into all of 'em , but just like an overview . Like why is life insurance so important in the business world?Speaker 3:
Yeah. And I'd love your guys' thoughts as well of how you kind of figured out what was an appropriate amount or how you factored in and what conversations you guys had to figure out why that made sense to you. I think your viewers would love hearing it from two business owners yourselves, but the, again, it comes down to protection. When you enter into an agreement with somebody or you own a business with someone or you own it outright, there is a massive amount of liability, right? From a financial perspective as well from a service perspective and life insurance can be utilized to protect that asset, which is your business, which is your clients in the most basic sense, life insurance for protection purposes for business owners, we see for buy, sell planning. So any business owner typically has a buy-sell arrangement, which certainly lays what would happen upon death, disability, or retirement or leaving that business, right. Or the sale of that business to somebody else. And so when you think about, talk about life insurance, talk about death . If somebody that's a business owner has a way unexpectedly, I should say, well, the business has to go somewhere. And if you haven't defined where that is, typically it goes to the estate of that business owner and somebody would need to buy that business or the shares of that business out of your estate to make it real simple. Will you use you guys as an example, if you split that business 50 50, and God forbids something were to happen to one of you, you passed away. Then one of the other person, the surviving business owner will have to purchase your shares because of the buy agreement that you have. Yep . Have to . You're gonnaSpeaker 1:
Worries . I'm dead .Speaker 3:
Sorry man . You're the, you're the good looking one out of the bunch . Oh man . So you're the lucky dog. If Devin were to pass away, he owned 50% of that business. And if the buys sell arrangement entails that Ryan purchases your shares out of your estate, how is he going to come up with the funds to do? And if it's unexpected, which is typically how this works, Ryan's gotta come up with money quick to buy those shares outta the estate. And why that's so important is because Ryan wants to be a hundred percent owner of state and Walsh. He needs the funds necessary to make sure that he can actually buy out and be a hundred percent owner of state and Walsh so that he's not now in a legal battle, Devin , maybe with your wife or your family at that point in time, if they didn't wanna be in the business, he is offloading that stress of them having to figure out how to run the business with Ryan. And so insurance can be utilized in a scenario like that, where if you were to pass away, Ryan receives that lump sum equal to your worth or your value in that business. So then he can take that lump sum money. As soon as you pass away , sorry , dev you're gone, but he takes that money and he can give that money to your family to be able to be a hundred percent owner of state and Walsh. And that is good for a myriad of different reasons, but it makes everybody whole, it fulfills the obligation set out in the legal document, which is that buy, sell arrangement. And it's most basic sense. It's the most flexible and efficient way of making sure that everybody is happy. At the end of the day, everybody is wiping their hands clean and there's no messes that have to happen moving forward. And it provides the ultimate flexibility to be able to do that as efficiently as possible, in my opinion.Speaker 1:
Yeah , that's great. EV well, I can't thank you enough for coming on today. I know this is your favorite month of the, year's all things, life insurance, and you just , just wanna talk about all , all , all you can. So we really appreciate it. And I hope everybody listens say really , um, got a lot of, I know it's not the, the funnest topic to talk about, but it , it is extremely important and something we wanna bring to late this month with September being life insurance awareness month. So thanks everybody for listening in. We hope you enjoy it . Make sure you subscribe. And like theSpeaker 5:
Episode episodeSpeaker 3:
You guys for having me appreciate it .