InsuranceNewsNet Magazine February 2012 : 11
DIAs MIx IT up WITH spIAs In InCOME AnnuITy MARkET | InFROnT more than one time. The average age of the SPIA buyer in the CANNEX database is 70, and the average single premium this year is $225,000. “The distribution firms are telling me that clients are putting from 20 to 40 percent of their life savings at age 70 into these products,” Baker says. “They are using the income payments to help cover basic living expenses, and keeping the rest of their portfolios invested and their legacy plans in place.” Issues with Income Annuities Income annuities do pose issues, how-ever. For example, Gary S. Mettler, vice president and director of advanced sales at Presidential Life Insurance Co., cau-tions that when it comes to dealing with marital property claims, illiquidity is both the bane and the benefit of SPIA contracts. “Not only are traditional SPIAs and newer DIAs illiquid as to cash surrender values or commuted values,” he writes in, “Oh No! DIAs & SPIAs in Marital Property Estates,” a white paper released in December, “but the annuitants and contract features such as COLAs (cost of living adjustments) and rights of sur-vivorship, period certain durations, pay-ment amounts and dates can’t be altered after the contract issue date.” How does all this shake out and how is marital interest determined for these contracts? The 12-page white paper addresses several aspects of the problem. For instance, Mettler writes that “the timing of contributions, in this case paid premium, determines mari-tal interest [existing case law varies by state]. If contributions are made dur-ing the marital period, they are marital property and earnings thereon are mar-ital property. If contributions are made prior to the date of marriage or after the date the marital interest ends [this date varies by state] then, these are separate property and the interest thereon is sep-arate property.” Baker mentions a few issues, too. One is how specific tax issues involving the IRS Code will be resolved. “These are currently being addressed in Washing-ton,” he says. Another issue is how to resolve questions over how to keep the income annuity assets on brokerage, bank and advisor statements of assets under management (AUM). “We need a standard methodology that shows the values of any asset that has been annuitized.” Of course, every emerging product has issues to be worked out and pecu-liarities to be understood. The CAN-NEX sales growth projection shows that producers and distributors are willing to learn more about DIAs. Our guess is, because DIAs help fill in the gaps in retirement planning, these products will be an even more popular resident in the income annuity neighborhood. Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at linda.koco@innfeedback.com. THE ULTIMATE TAX REVIEW KIT FOR ADVISORS Reveal Tax Savings and Income for Your Clients. Uncover NEW Sales Opportunities for Yourself. FREE! In Your Copy of “Reducing Your Tax Burden” You’ll Receive: • Point-of-Sale Guides • Tax Overlay Sheets pinpoint potential sales opportunities • “Are You Paying More in Taxes Than You Need To?” Client Guide • Step-by-Step Appointment Setting Instructions • Sample scripts, direct mail lead samples, client letters This might be the most resourceful and lucrative sales tool you come across all year! To order your own free copy, visit www.ReduceTaxesToolkit.com complete the form and receive your free copy while supplies last. February 2012 InsuranceNewsNet Magazine 11