Case of the Month September 2017v2 (PDF)

Case of the Month
Converting an Annuity into an Universal Life Insurance Policy with a Long Term Care Benefit
This case study is being sent in hopes that you can find opportunities within your existing client
base that look similar to this case. 
 

This month’s case was submitted by a Mesa, Arizona, Wells Fargo Advisor. The FA has a 70
year old female client in good health with a $500,000 Jackson National annuity with guaranteed
lifetime income and death benefits. This particular annuity is several years old and has a 6%
income draw for the annuitant’s lifetime. The only challenge is the client does not need the
income and wants to leave her daughter the proceeds barring that the client does not have any
unforeseen long term care needs.
 

The Opportunity: By turning on the lifetime income stream of 6%, we yield the client an after
taxable income stream of $25,000. With this annual income we can purchase a Death Benefit
and Long Term Care benefit in the amount of $1,021,715. This policy will also provide the client
with Long Term Care for 100 months with a monthly benefit of $10,217. If the client does not
ever need Long Term Care, she can pass the entire death benefit of $1,021,715 tax free to her
daughter. In addition, any unused dollars left from annuity’s cash value or death benefit will
also transfer to the client’s daughter as additional proceeds upon the client’s death. 
 

This design allows us to transfer a larger amount of inheritance to the client’s child and also
protects the client’s existing assets from a long term care exposure by allowing the use of twice
the dollar value of the existing annuity for any long term care expenses needed. At worst, the
client spends twice the amount of the annuity or $1,021,715 from the new policy’s Long Term
Care benefits. This however would still leave the daughter all the other assets in the estate. In
reality, Mom will probably use $300,000 of the Long Term Care pool and leave her daughter the
remaining tax-free death benefit of $700,000+ and the remaining value left on the Jackson
National annuity upon death. 
 

The commissionable target on the case is $25,000 and the gross production to the Wells Fargo
Advisor’s Grid is $16,250. Not a bad day for taking a limited revenue asset that is atrophying on
the books and maximizing the benefits to the client, her daughter and to the advisor. In
addition, let’s not forget about the fact that this FA will now have a much easier time of
maintaining the overall portfolio when the primary account holder passes away. Remember,
the daughter has to come and meet with the FA to receive the death benefit! I would think it
would be harder to move one’s newly inherited assets, knowing full well the reason why She
has inherited the larger tax free amount was because the FA allowed for this type of planning to
be implemented!


When you are doing your client’s annuity reviews please ask yourself if the client will ever really
need the money? If the answer is probably no or only a portion of the asset, please do not
hesitate to call us. We would consider it a privilege to help you and you client with this type of
design work and strategy implementation. 


John Hancock Life Insurance Company (U.S.A.)
A LIFE INSURANCE POLICY ILLUSTRATION
A Flexible Premium Universal Life Insurance Policy

Protection UL Form: 13PROUL

Long-Term Care Rider Cover Page

Presented By: VALUED AGENT

Illustration Assumptions
VALUED CLIENT
Female - Preferred NonSmoker
Age: 70

Initial Total Death Benefit $1,021,715 / Initial Long Term Care Benefit $1,021,715
Face Amount $1,021,715
Initial Planned Premium: $25,000.00 / Billing Mode: Annual
Death Benefit Option 1; Cash Value Accumulation Test
State: Arizona
Based on Current Charges and an Initial Current Rate of 5.05%

Initial Planned Premium

$25,000

Initial Death Benefit

$1,021,715

Initial Accelerated Benefit / Long-Term Care

$1,021,715

Initial Accelerated Benefit Percentage

100%

You may accelerate some, all or none of your Accelerated Benefit Balance to
pay for long-term care (LTC) expenses.
If your death benefit is accelerated for LTC payments, it will provide at least
100 months of accelerated payments for long-term care expenses up to the
monthly maximum shown below.

Monthly Maximum Benefit Amount
Payable for qualified long-term care services:
• Home Health Care
• Nursing Home Care
• Assisted Living Care
• Adult Day Care

$10,217

The Long-Term Care Rider is designed to accelerate a portion of the death benefit (subject to a maximum monthly
percentage each month), in order to reimburse expenses as a result of the Insured receiving Qualified Long-Term Care
Services.
This Supplemental Illustration is valid only if accompanied by all pages including the Basic Illustration pages.
Refer to the Basic Illustration for guaranteed elements and benefits and other important information.
This is your Basic Illustration and is valid only if all illustration pages are included.
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John Hancock Life Insurance Company (U.S.A.)
A LIFE INSURANCE POLICY ILLUSTRATION
A Flexible Premium Universal Life Insurance Policy

Protection UL Form: 13PROUL

Illustration Based on Guaranteed Assumptions

Presented By: VALUED AGENT

Illustration Assumptions
VALUED CLIENT
Female - Preferred NonSmoker
Age: 70

Policy
Year
1
2
3
4
5
6
7
8
9
10

EOY
Age

Planned
Premium

Policy
Value

Net
Surrender
Value

Net
Death
Benefit

Benefit
for
LTC

71
72
73
74
75
76
77
78
79
80

25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000

14,248
11,345
6,460
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0
0
0

1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715

1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715

0
0
0
0
0
0
0
##

0
0
0
0
0
0
0
##

1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
##

1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
##

Totals:
11
12
13
14
15
16
17
18
Totals:

Initial Total Death Benefit $1,021,715 / Initial Long Term Care Benefit $1,021,715
Face Amount $1,021,715
Initial Planned Premium: $25,000.00 / Billing Mode: Annual
Death Benefit Option 1; Cash Value Accumulation Test
State: Arizona
Based on Guaranteed Charges and a Guaranteed Rate of 2%

250,000
81
82
83
84
85
86
87
88

25,000
25,000
25,000
25,000
25,000
25,000
25,000
##
425,000

## Indicates that the policy has lapsed under the illustrated assumption. Additional premium would be required to maintain policy benefits.
This is your Basic Illustration and is valid only if all illustration pages are included.
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John Hancock Life Insurance Company (U.S.A.)
A LIFE INSURANCE POLICY ILLUSTRATION
A Flexible Premium Universal Life Insurance Policy

Protection UL Form: 13PROUL

Illustration Based on Nonguaranteed Assumptions

Presented By: VALUED AGENT

Illustration Assumptions
VALUED CLIENT
Female - Preferred NonSmoker
Age: 70

Policy
Year
1
2
3
4
5
6
7
8
9
10

EOY
Age

Planned
Premium

Policy
Value

Net
Surrender
Value

Net
Death
Benefit

Benefit
for
LTC

71
72
73
74
75
76
77
78
79
80

25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000

14,766
28,491
41,982
55,047
67,328
79,014
89,680
98,488
104,949
108,716

0
0
11,972
27,539
42,318
56,506
69,674
80,981
89,944
96,213

1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715

1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715

115,470
119,514
120,334
129,150
141,264
151,406
161,515
171,555
181,493
190,335

105,466
112,012
115,333
126,648
141,264
151,406
161,515
171,555
181,493
190,335

1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715

1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715

198,794
206,884
214,616
221,978
228,858
235,150
241,071
246,618
251,807
256,609

198,794
206,884
214,616
221,978
228,858
235,150
241,071
246,618
251,807
256,609

1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715

1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715

Totals:
11
12
13
14
15
16
17
18
19
20

250,000
81
82
83
84
85
86
87
88
89
90

Totals:
21
22
23
24
25
26
27
28
29
30
Totals:

Initial Total Death Benefit $1,021,715 / Initial Long Term Care Benefit $1,021,715
Face Amount $1,021,715
Initial Planned Premium: $25,000.00 / Billing Mode: Annual
Death Benefit Option 1; Cash Value Accumulation Test
State: Arizona
Based on Current Charges and an Initial Current Rate of 5.05%

25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
500,000

91
92
93
94
95
96
97
98
99
100

25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
750,000

This is your Basic Illustration and is valid only if all illustration pages are included.
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John Hancock Life Insurance Company (U.S.A.)
A LIFE INSURANCE POLICY ILLUSTRATION
A Flexible Premium Universal Life Insurance Policy

Protection UL Form: 13PROUL

Illustration Based on Nonguaranteed Assumptions (cont'd)

Presented By: VALUED AGENT

Illustration Assumptions
VALUED CLIENT
Female - Preferred NonSmoker
Age: 70

Policy
Year
31
32
33
34
35
36
37
38
39
40

EOY
Age

Planned
Premium

Policy
Value

Net
Surrender
Value

Net
Death
Benefit

Benefit
for
LTC

101
102
103
104
105
106
107
108
109
110

25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000

261,491
266,088
270,400
274,429
278,174
281,663
285,370
289,021
292,616
296,156

261,491
266,088
270,400
274,429
278,174
281,663
285,370
289,021
292,616
296,156

1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715

1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715

299,657
303,043
306,070
308,332
309,150
307,370
301,026
286,737
258,646
206,519

299,657
303,043
306,070
308,332
309,150
307,370
301,026
286,737
258,646
206,519

1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715

1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715
1,021,715

61,457
64,561
67,821
71,246
74,844

61,457
64,561
67,821
71,246
74,844

1,021,715
1,021,715
1,021,715
1,021,715
1,021,715

1,021,715
1,021,715
1,021,715
1,021,715
1,021,715

Totals:
41
42
43
44
45
46
47
48
49
50

1,000,000
111
112
113
114
115
116
117
118
119
120

Totals:
51
52
53
54
55
Totals:

Initial Total Death Benefit $1,021,715 / Initial Long Term Care Benefit $1,021,715
Face Amount $1,021,715
Initial Planned Premium: $25,000.00 / Billing Mode: Annual
Death Benefit Option 1; Cash Value Accumulation Test
State: Arizona
Based on Current Charges and an Initial Current Rate of 5.05%

25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
1,250,000

121
122
123
124
125

25,000
0
0
0
0
1,275,000

This is your Basic Illustration and is valid only if all illustration pages are included.
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