What’s New in Version 16.0 of the InsMark^® Illustration System

1.   Comparison to Alternatives: Various Financial Alternatives, Term and
      Invest the Difference, Other Investments vs. Your Policy
        (Personal Insurance tab)

An Equity Account and a Tax Deductible Retirement Plan (“TDRP”) have been added to the investment alternatives in each of these comparison illustration modules. When you compare your cash value permanent plan to a TDRP, in addition to the main illustration report, be sure to study carefully the detail report so you’ll fully understand the logic.

Negative investment balances: Often negative values occur in the later years of an alternative investment due to an alternative investment trying to match policy cash flow or, in the case of term insurance comparisons, high advanced age term premiums. Responding to one of the most requested options from our users, you now have the option to truncate the investment if/when its values are depleted showing $0 thereafter. This option is available via this new prompt on the Basic Data tab:

Cash flow in a separate column: You can also elect to illustrate policy cash flow (withdrawals and loans) in a separate column in all three modules rather than as a negative in the payment column via this new prompt on the Basic Data tab:

Note: Due to space consideration on the illustration, using this new cash flow option in Various Financial Alternatives will restrict your alternative investment choices to three instead of four.

With the Term and Invest the Difference module, the Matching Interest Rate report provides the interest rate that the “difference” between the two premiums must earn in order to match the policy’s cash value. In some situations (particularly involving participating whole life with paid-up additions), the policy’s death benefit can be significantly higher than the term death benefit plus its supplemental investment fund. When this occurs, the interest rate that the “difference” between the two premiums must earn is considerable in order for the death benefit of the term plus its supplemental investment fund to match the whole life policy’s death benefit. In this circumstance, you may want to include a match of the death benefits in the Matching Interest Rate report.

You can make this selection using the following new prompt located on the bottom left of the Term Death Benefit tab:

Other Investments vs. Your Policy has a new feature that can be used to make the payment for the alternative investment different than the premium for the life policy:

One reason to do this is when you are comparing a life policy to a single sum in an investment and want to avoid modified endowment contract (MEC) status for the life policy. Schedule premiums for a non-MEC and compare the results to single sum in the alternative investment. You will find the cash accumulation benefit of the life policy will typically outearn the alternative in most cases even with the disparity in the timing of premiums between the two.

Note: This option to mis-match payments is not available for comparisons in Various Financial Alternatives or Term and Invest the Difference.

2.    Cost of Waiting
          (Personal Insurance tab)

The Cost of Waiting module is useful in proving the high cost of delaying the purchase of life insurance both in terms of increased premiums as well as reduced values. We have added “Proof” reports that detail -- on year-by-year basis -- the nature of the loss caused by waiting.

We have also eliminated the requirements for both policies to have the same premium and, in addition, we included measurement of any differences in death benefit. Both enhancements make this module much more effective and are invaluable when comparing whole life policies.

3.    Dynasty Trust vs. Non-Dynasty Trust
          (Personal Insurance tab)

One of the most powerful estate planning tools is the Dynasty Trust, a trust that is designed to pass family assets to children, grandchildren, great grandchildren and beyond while avoiding the estate tax bite at each death. We have added an illustration module that compares a traditional Irrevocable Trust vs. an Irrevocable Dynasty Trust vs. an Irrevocable Insured Dynasty Trust. With the Irrevocable Insured Dynasty Trust, the first generation is insured after which the death proceeds are assumed invested by the trust. The results strongly favor the insurance strategy.

4.    Funding Estate Liquidity with Discounted Dollars
          (Personal Insurance tab)

Dollars of Benefits for Pennies of Cost is featured in several places in the InsMark Illustration System. The newest one is the Funding Estate Liquidity with Discounted Dollars module where we compare the three ways to fund estate taxes: (1) Cash; (2) Borrowed funds; (3) Life insurance. Guess which one proves to be more efficient -- every time!

5.    Comparison of Insurance Plans
          (Personal Insurance tab)

The main use of this module is to compare different illustrations for the same insured. Its rate of return reports are valuable in this regard. 

One of the distinctive features of this module is its capacity to compare the executive’s share of different benefit plans, say, executive bonus vs. split dollar. When this occurs, an enhancement to the module provides that the illustration headers refer to the specific executive benefit plan(s) being compared. 

In order to make this benefit comparison, you must first export the executive’s share of each benefit plan to Source Data Storage (using the Export command located on the right side of the InsMark benefit plan workbook while in edit mode). That data can then be imported into the Comparison of Insurance Plans module. 

When cash flow is present in your policy data, another enhancement provides that the cash flow is illustrated in a separate column rather than as a negative in the premium column.

6.    Life Plan
          (Personal Insurance tab)

Initially available only in a separate system, the Life Plan illustration has been added to the InsMark Illustration System. The three key ingredients of modern cash value life insurance are death benefit, cash accumulation, and spendable cash flow through policy withdrawals and/or loans. Life Plan is designed for easy explanation of these three features in just a couple of pages. A rate of return line graph rounds out the presentation. 

Output from Life Plan is available in English or Spanish. We added the Spanish option due to the tremendous growth of the U.S. Hispanic population which, according to the Census Bureau, is approaching 50 million and growing. A significant segment of this group prefers to transact financial business in Spanish, and Life Plan addresses this issue.

7.    Executive Trifecta®
         (Executive Benefits tab)

A new Benefit Summary has been added that highlights plan benefits and indicates which report reflects the specific information relative to each benefit. Special thanks to Kerry Walker, InsMark Platinum Power Producer, for his input on this project. 

Tax exempt organizations have been added to the list of business types that can use this unique benefit plan, the only such plan that works for both owners and non-owners of C and S corporations, LLCs, and Partnerships -- and now it can be illustrated for executives of tax exempt organizations.
“Trifecta” refers to a winning sequence of three, and Executive Trifecta delivers three, very powerful, sequential benefits: 

1) Selected executives whose deaths would cause a serious financial loss for an employer are insured in favor of the employer thereby providing indemnification for such a loss. 

2) During their participation, each insured executive is provided with employer-paid survivor income benefits should death occur while employed. 

3) At the executive’s retirement, disability, or involuntary severance from employment without cause, the policy is contractually transferred to the participating executive (as a deferred bonus) thereby creating a supplemental retirement asset. After the policy transfer, any payment of the life insurance death benefit is made directly to the executive’s personal beneficiaries.

8.    Links to Documents On A Disk™ (“DOD”)
         (Executive Benefits and Split Dollar tabs)

There is now a link to the pertinent section of DOD for all Executive Benefits in all InsMark Systems via a click on a selection like the one below for Endorsement Split Dollar. It appears on the lower right side of the affected modules (in edit mode).

9.    Tax Deferred Calculator
          (InsCalc^® tab)

Guaranteed Withdrawal Benefit: The Tax Deferred Calculator (designed to simulate a deferred annuity) has a new option on the Schedule Distributions tab by which you can illustrate a guaranteed withdrawal benefit. If this option is selected, it means that if you illustrate a withdrawal pattern that causes the annuity cash values to be depleted, any withdrawals thereafter will continue to be illustrated. (This feature obviously assumes your annuity has an intact benefit account separate from its cash value account.)

10.  Six New IRA Calculators
          (InsCalc tab)

The new IRA calculators are: 

IRA Calculator
Roth IRA Calculator
Comparison of IRAs  

Inherited IRA Calculator
Inherited Roth IRA Calculator
Comparison of Inherited IRAs  

Each one provides you with terrific capacity for evaluations of retirement strategies, and they are sure to impress your clients with your analytical skills. Most clients like to do business with well-rounded advisers, and these new calculators will certainly add to that dimension. 

There are several advantages that favor a Roth IRA compared to an IRA. Three of them are: 1) tax free distributions from plan values; 2) the absence of government-directed required minimum distributions; and (3) although both inherited variations have required minimum distributions, heirs are much better off with the tax free cash flow generated by distributions from an Inherited Roth IRA. There is one tax disadvantage -- contributions to a Roth are not deductible. 

If an IRA is currently in force, it can be converted to a Roth, but only with payment of income taxes on the converted amount, a condition that causes many to avoid such conversions. 

Due to the Roth’s absence of required minimum distributions for parents, the inherited Roth IRA typically has a greater beginning value than an inherited IRA. This, coupled with tax free distributions from the inherited Roth, can produce a serious difference in wealth for heirs. From a generational perspective, a Roth for the parents transformed into an inherited Roth for the children is a winner by a substantial margin for all participants, and it may well be the deciding factor when parents consider a Roth conversion. To illustrate this, follow these steps: 

1)   Use the IRA Calculator and Roth IRA Calculator to project alternate values for the parents. 

2)   At an appropriate duration (life expectancy, for example), enter the ending values of the parents’ IRA and Roth IRA as the beginning values in the appropriate Inherited IRA Calculator and Inherited Roth IRA Calculator. 

3)   Illustrate the Inherited IRA Calculator and Inherited Roth IRA Calculator for an appropriate duration, say, the heirs’ life expectancy. 

4)   Use the Comparison of Inherited IRAs to compare the two inherited plans calculated in Step 3. The results will stun you (and the parents). 

Note: If you are licensed for Version 11.0 (or higher) of InsMark’s Wealthy and Wise®, you can do a much more comprehensive analysis of IRA vs. Roth IRA for Step 1 within the context of the overall estate by using the Defined Contribution (think IRA) and Roth Defined Contribution (think Roth IRA) sub-tabs located on the Retirement Plan Assets tab. Once finished with that, the Comparison of Inherited IRAs in the InsMark Illustration System will be of invaluable help in establishing the continuing value for heirs.

11.   Two New Calculators
            (InsCalc tab)

The Single Premium Immediate Annuity Calculator illustrates the after tax results of utilizing this increasingly popular annuity. The Mortgage Payment Calculator provides easy access to monthly payments and year-by-year outstanding loan balance for mortgages of any duration.

12.  New Graphics
          (Personal Needs Analysis tab)

We added two new graphics to the Retirement Needs Analysis module: (1) Expected Assets vs, Retirement Income Goals -- this mirrors results of the numerical report of the same name that calculates any projected shortfall in desired retirement income and (2) Sources of Annual Retirement Income Cash Flow which shows the sources of income in a completed plan that includes funds furnished by the new Target Retirement Account™ should it be needed.

13.  Additional Illustration Years
          (All tabs)

Maximum illustration years are increased to 100. In view of many policies being illustrated well beyond historical durations, this is a valuable enhancement.

 14.  Sample Illustrations
          (All modules)

Sample Illustrations for all modules are available via the “Sample Illustrations” selection on the lower right of the Workbook Main Window or under Help on the main menu bar or via the “Samples” selection on the right side of each module while in Edit mode.

15.  Additional Illustration Years
          (All modules)

Years to illustrate have been extended to 100.

Important Note: The approval of a client’s legal and tax advisers must be secured regarding the implementation or modification of any planning technique discussed as well as the applicability and consequences of new cases, rulings, or legislation upon existing or impending plans.

IRS Circular 230 Disclosure

The following statement is required by IRS regulations: In order to comply with requirements imposed by the IRS which may apply to this document (including any attachments, enclosures, or referred material) as distributed or as re-circulated, please be advised that the material contained herein is not intended or written to be used, and it cannot be used, by anyone for the purposes of avoiding any penalty that may be imposed by the Internal Revenue Service under the Internal Revenue Code. In the event that this document (including any attachments, enclosures, or referred material) is also considered to be a “marketed opinion” within the meaning of the IRS guidance, then, as required by the IRS, please be further advised that the material contained herein is written to support the promotions or marketing of the transactions or matters addressed by the material contained herein, and, based on the particular circumstances, you should seek advice from an independent tax adviser.