We look forward to the Van Mueller newsletter every month. It's chock-full of sound bites, sales tips, and eye-opening statistics. Here are our favorite parts of the February 2017 edition. We saved it as a follow-up to our April Sales Kit because they're both geared toward helping clients with income tax strategies and financial planning. We're sharing his introduction and 2 of the 7 monthly sales ideas. If you like what you read, we encourage you to click here and become a subscriber.
Reprinted with the author's permission.
February, 2017 – 7 Ideas and Views Newsletter by Van Mueller
Donald John Trump
The 45th President of the United States: I bet most of you never thought that would happen.
I hope we give him enough time to see if he can do something positive for our economy and our country: I have a feeling he will not be given enough time.
You will notice I did not tell you whether I was or am for his policies or against his policies. My opinion Does Not Matter. Isn’t it true that the only opinion that matters is that of our prospects and clients? We can only elicit those opinions by asking questions.
Do they think President Trump’s policies will create more certainty or uncertainty? Will they increase taxes or reduce taxes? Will healthcare quality and its costs stay the same, get better, or worsen? Will the inevitable cost increases be manageable or exorbitant? Will investment markets strengthen or weaken? Will our so-called “entitlements,” Social Security, Medicare and Medicaid remain the same or will they be weakened?
I know you get the idea. Do you realize how many questions we can ask about this new era of government led by President Trump?
Do you realize how many questions we can ask about this new era of government led by President Trump?
Answers to these questions and building strategies that first protect against harm, allow for safe growth and then provide the liquidity to take advantage of what might be considered bad circumstances are vital if our prospects and clients want to fulfill their desires for successful financial futures and stress free retirements.
Really, please think about this, isn’t this the best time ever to do what we do? Don’t our prospects and clients have more need for what we do than ever before? Don’t we have the finest products we’ve ever had?
May I please give you a couple more examples of how what is currently happening is creating the greatest opportunity for insurance and financial professionals to assist the American people to plan for things they have never planned for before?
Thomas Price. This is an important name in President Trump’s cabinet. He will have enormous impact on Americans and therefore create one of the greatest planning opportunities our business has ever seen.
Mr. Price was a representative in the House of Representatives until his current appointment as the Secretary of Health and Human Services. In the House of Representatives he was Chairman of the House Budget Committee. This is a very powerful position. Before he was involved in politics, he was a physician. He comes from a family of physicians.
When he was in the House he recommended cuts to both Medicare and Medicaid, He recommended an IMMEDIATE increase in the age of eligibility for Medicare to age 67 rather than age 65. Do you understand how much additional retirement money would be removed from Americans having to pay two extra years of under age 65 health insurance premiums? I expect this will be one of the recommended new policies to curb rising government healthcare expenditures.
Another enormous change will be the use of block grants to reimburse states for Medicaid rather than the current 100 percent reimbursement for Affordable Care Act enrollees on Medicaid. That means reduced money in every state for Medicaid, Title 19. Do you think it will become easier or more difficult for grandma and grandpa to qualify for assistance if they go into a nursing home?
Do you think it will become easier or more difficult for grandma and grandpa to qualify for assistance if they go into a nursing home?
It is believed that in an early examination of President Trump’s 2018 budget there is a request for a $1 trillion reduction in Medicaid spending. If that is even close to true, who will pay those additional costs? You are correct: The American people. Do you really think the American people are aware this is about to happen? Do people with money who are looking for tax reduction and more affordable health care costs understand that even if that comes true, they will have to pay in different ways to pay for all the people who won’t be able to afford these changes? Doesn’t that make tax planning and retirement planning an urgent priority?
It is important that we ask about these issues and it is important that we ask people in this country who have the most money; that’s right, grandma and grandpa. Now we have important reasons to share with them why they should plan to keep their money in the family rather than giving their money to government, nursing homes or hospitals.
Here’s an idea that will help you help them accomplish that. Great agents are accomplished at helping their clients find the money to put into cash value life insurance and annuities.
I hope you laugh when I say this: Most Americans hate taxes worse than they hate insurance sales people. I just tricked you. Haven’t I been asking you to position yourself as an advocate or an advisor or a counselor? Don’t people like them better than a salesperson? Then why do most insurance and financial advisors act like salespeople rather than advocates?
Healthcare costs are going to be devastating for most Americans. What if we could show grandma and grandpa a way to help without giving up control of their money? What if we could show them how to make their families the beneficiaries of their life’s work rather than having the Internal Revenue Service be the primary beneficiary?
What if we could show grandma and grandpa a way to help without giving up control of their money?
The income tax laws in our country use a progressive tax system. What that means is that the higher your income, The higher the percentage of that income is taxed. We have tax brackets that start at zero and progress to 10 percent then 15 percent, 25 percent, 28 percent, 33 percent, 35 percent and finally 39.6 percent. That is what is meant by progressive rather than a flat tax. We can help clients control their tax by understanding how to use the progressive nature of the income tax law.
To start, I need you to get some foundational information. Proceed in this order please:
- Go to www.irs.gov.
- “Click” on the orange box entitled “Forms and Publications”.
- Look right below where it says “Featured Forms and Publications”.
- “Click” on “Instruction for Form 1040” highlighted in blue.
- Print the ENTIRE instruction package. It is about 105 pages.
Please read the 1040 instruction booklet. The amazing benefits of life insurance and annuities are tax deferral, tax free access and income tax free death benefit on life insurance. After you read the booklet, single out these pages and use them to show prospects and clients how they can be in control of their income tax liability on IRAs, 401k’s, 403B’s, 457 plans, gains on nonqualified annuities, capital gains, etc.
Here is a list of the important pages.
- Page 30. This is the Social Security worksheet. It calculates how little or how much of your Social Security is taxable.
- Page 40. This is a chart that shows the standard deduction for people over age 65.
- Page 41. This shows how much the personal exemption is. In 2016 it was $4,050. In 2017 it will be $4,100.
- Page 102. This is a pair of charts that show how much revenue we take in and where it comes from, and how much revenue we pay out and for what programs.
- Page 103. These are the tax rate schedules. Pay particular attention to singles and married couples filing jointly.
Here’s how you can make up easy to remember rules that will allow you to help people. Page 40 of the 1040 instructions shows that in 2016, the standard deduction for a couple over age 65 filing a joint return was $15,000.00. On page 41 it shows that the personal exemption for each person was $4,050.00. So $8,100 ($4,050 x 2) plus $15,000 equals $23,200. Essentially, this means that this over 65 couple could make $23,200 of fully taxable income over and above their Social Security and pay little or no income tax, I will come back to this in a minute when I share an amazing sales idea.
Essentially, this means that this over 65 couple could make $23,200 of fully taxable income over and above their Social Security and pay little or no income tax.
Continuing on with my example; if you look at the schedule on page 103 you will see that you can make $75,200 or less and be in the 15 percent income tax bracket. If you add the standard deduction and personal exemption of $23,200 to $75,200 it adds up to $98,400. In 2017 those numbers rise to $23,400 plus $75,900 for a total of $99,300.
In 2016 I used the Van Mueller rule of 98-15 to remind me when married couples were in the 15 percent income tax bracket. In 2017 I will use the Van Mueller rule of 99-15 to remind me when married couples over 65 are in the 15 percent income tax bracket.
Knowing this creates enormous opportunities with prospects and clients. First, under current tax law if you are in the zero, 10 percent or 15 percent income tax bracket you pay no capital gains. If a couple over 65 has $50,000 of taxable income you could show them that they could take almost $50,000 in capital gains and pay no income tax on that money. It would cause their Social Security to become mostly taxable, but their overall tax rate on the $100,000 of income, even with their Social Security taxable would be under 3 percent. That would help prospects and clients harvest capital gains before any possible crash happened with little or no income tax on that money.
Second, knowing my Van Mueller rules would allow you to uncover ways to help prospects and clients reduce or even eliminate their overall income tax on qualified money and gains on nonqualified money.
Knowing my Van Mueller rules would allow you to uncover ways to help prospects and clients reduce or even eliminate their overall income tax on qualified money and gains on nonqualified money.
Think of a prospect or client that is married, over 65, has an income comprised of $30,000 of Social Security and a $10,000 RMD (Required Minimum Distribution.) Ask them this question: “Is there someone at the Internal Revenue Service that you are so particularly fond of that you want to leave them most of your money?” Do you realize that if you have two or more nonspouse beneficiaries that it is highly likely that the Internal Revenue Service will be your primary beneficiary? Are you okay with that? Are you going to leave it like that?” They will ask you what you are talking about. If the standard deduction and personal exemption for a couple over 65 is $23,400 this year, couldn’t that couple withdraw another $13,400 of fully taxable money and pay little or no income tax? Ask them why they are not doing that.
That would be a small tax of $320.00 per year. So if they took an additional $13,400 per year for their 20 year life expectancy starting at age 65 they would withdraw $268,000 of fully taxable income and only pay $6,400 in taxes. Ask they why they are not doing that. You can then reallocate those withdrawals to life insurance and annuities with all the income tax liability removed.
The idea becomes even more impressive because of the progressive tax laws which follow the standard deduction and personal exemption with a 10 percent bracket and then a 15 percent bracket. In a moment I will share a guide with you. You can max out the benefit in the 15 percent bracket and have a couple withdraw $99,300 per year for twenty years. That is $1,986,000 if they do that the income tax would be $208,530 over those twenty years or 10.5 percent.
Ask your clients if they knew they could do that, why aren’t they? It leads to some really big sales.
Here is the guide:
Married Couple Over Age 65
- Standard Deduction in 2017 $15,200
Personal Exemption in 2017 $8,200
($4,100 per person) $23,400
The first $23,400 of taxable income is not taxable because it is offset by the standard deduction and personal exemption. If you with draw $23,400 every year for 20 years you have withdrawn $468,000 and paid NO income tax on those fully taxable withdrawals.
- The next $18,650 of income is taxed at 10 percent which is $1,865. If you divide $1,865 by $42,050 ($23,400 + $18,650) the percentage is 4.4 percent.
If your clients withdraw $42,050 per year for 20 years and paid the taxes on that money every year for twenty years they would withdraw $841,000 of fully taxable money. At this level they would pay 4.4 percent of $841,000 or $37,004 to eliminate the tax on this money. Ask your client if they knew this was possible would they do it?
- The next $57,250 of income is taxed at 15 percent. That is $8,588. If you divide $10,453 ($1,865 + $8,588) by $99,300 ($23,400 + $75,900) the percentage is 10.5 percent.
If your client drew out $99,300 per year of fully taxable money for 20 years they would withdraw $1,986,000. At this level they would pay 10.5 percent of $1,986,000 or $208,530 to eliminate the income tax on that money.
- Ask your prospects and clients these questions.
(0 percent bracket) Ask your client if they would be willing to eliminate taxes on $468,000 at the zero percent level by PAYING NOTHING?
(10 percent bracket) Would they like to pay $37,004 to eliminate taxes on $841,000 over the next 20 years?
(15 percent bracket) Would they like to pay $208,530 to eliminate taxes on $1,986,000 over the next 20 years?
Isn’t the alternative at each of those levels even at 30 percent appalling? 30 percent of $1,968,000 is $595,800. Could the tax be even higher? How many people that we call on realize this problem and the opportunity it presents?
- At each level you can sell on annuity, a modified endowment contract (MEC) or an annual premium life insurance policy on any amount of the annual withdrawals reallocating the money after it has been withdrawn and the taxes have been paid on the withdrawals.
- This is used to reduce or eliminate taxes on IRA withdrawals. This can also be used to eliminate gains on annuities. It can be used to eliminate capital gains if your client is in the 0, 10 or 15 percent tax bracket. Remember the Rule of 99-15. If a married couple over the age of 65 makes less than $99,300 they are in the 15 percent ordinary income tax bracket. That puts them in the zero percent capital gains tax bracket. This is a great opportunity to access capital gains in stocks, bonds, mutual funds and real estate.
- These products; Life insurance and annuities also feature these benefits:
- No probate
- Incontestable and Private
- Control from the grave
- Creditor and predator protection
- Medicaid versatility
Finally, this is really an idea that is appealing to people who want to keep their money in the FAMILY. However, always give them a personal reason to consider this idea.
Ask them, “when are you going to die, exactly?” They will say, I don’t know. Then ask, “Wouldn’t the least risky way to make this money last longer be to reduce or eliminate the income tax liability on this money? At the very least wouldn’t you want to do this for you and your spouse?”
This will provide amazing opportunities if you will learn it and try it.
I will try to convey ideas like this every month for the rest of the year. Let’s get started.
We're passing on two of the newsletter's monthly sales ideas - every issue of the newsletter contains 7 ideas. Subscribe to get them all.
Idea #1: Tax Breaks Will Be Disappearing
I have been sharing in this newsletter and my speeches that for some time now the government is looking to increase tax revenue without raising rates. It is highly likely that during the new administration term in office that will come to pass. If the government reduces or eliminates “itemized deductions” they will increase revenue.
If the government reduces or eliminates “itemized deductions” they will increase revenue.
Please think about this. No deduction for health insurance or health care costs. No deduction for state and local taxes paid. No deduction for home mortgage interest and points for mortgage origination. No deduction for charitable contributions. No deduction for casualty losses. No deduction for gambling losses. No deduction for miscellaneous expenses such as union dues.
How will government get away with doing something like that, you ask. Easy. They will explain to the public that only rich people “itemize” on their tax returns; that most take the standard deduction. That isn’t quite true. Many middle and upper middle class Americans are only able to afford home ownership because of those deductions.
The government will do it anyway because they can sell it as not being a tax increase.
Don’t you see! That’s why life insurance becomes more and more valuable. There are fewer and fewer tax deductions. Fewer and fewer places to build tax free wealth.
Ask your prospects and clients if they want to take advantage of life insurance’s tax free benefits while they still can. You will be surprised how many times they will say yes to this opportunity.
Title: Tax breaks: One of the biggest U.S. budget busters
www.money.cnn.com (CNN Money, January 6, 2017)
Title: The $68 billion question: Will Trump, GOP cost NY its most popular tax deduction?
www.syracuse.com (Syracuse.com, December 13, 2016)
Title: Tax Deductions For Charitable Contributions Have Got To Go
www.forbes.com (Forbes, January 6, 2017)
Idea #2: Additional Tax Cuts - Loophole Closing
This article appeared in Forbes and should be used to show prospects and clients that they are running out of time to stay in control of their financial futures and retirements. This article should help to make this an exciting time for insurance agents and financial professionals. If you know what the government is looking to take away you can ask prospects and clients if they want to do something before they would be unable to act. Here is a great list.
- IRA stretch provisions – No inherited IRAs or stretch provisions for non-spouses.
- Roth Accumulations – Mandated RMD’s from even Roth IRA’s at 70½
- Carried Interest – Hedge funds and LBO’s will not be allowed to turn earnings into capital gains.
- Muni Bonds – They will cause all kinds of tax free income to become taxable and could even become taxable themselves if tax rates become low enough for them not to be viable.
- Inside Buildup – This will return with a vengeance. Taxing the internal buildup of life insurance and annuities on an accrual basis. People who already own these products would probably receive grandfathering. This is also an important reason to be a member of NAIFA.
- Gifts of Appreciated Property
- Like Kind Exchanges
- Annuity Trusts
These are all things that our clients will not realize until after they happen unless we ask if they will be harmed. We can’t stop this from happening, but we can help lessen the impact or even take advantage of the change. Ask your clients about these issued.
Title: TRUMP The IRS
www.forbes.com (Forbes, December 30, 2016; page 90-96)
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