WHOLE LIFE INSURANCE POLICY
60-80 (age last birthday)
|10-year Limited-Pay||7-year Limited-Pay
|Ages: 60-74||Ages: 75-80
Minimum Face Amount
No specified minimum; premium is based on SPIA payout
Maximum Face Amount
This policy has no defined maturity age. For purposes of projecting values in the proposal software, the proposal is deemed to mature at age 100. The cash value is designed to equal the death benefit at age 100.
Cash values are guaranteed and based upon the 2017 CSO mortality table.
SINGLE PREMIUM IMMEDIATE ANNUITY
60-80 (age last birthday)
|10-year Payout||7-year Payout
|Ages: 60-74||Ages: 75-80
Minimum SPIA Premium
Maximum SPIA Premium
Life premium that purchases up to a $450,000 face
How Generation Legacy® Works
SPIA payouts are guaranteed and payable annually for the full period certain duration. Payouts are made at the beginning of each contract year and vary by SPIA duration. On the application, the owner will designate Baltimore Life as the payee of the first and future SPIA payouts which will be used to fund a whole life insurance policy. The owner may change the payee of SPIA payouts. However, naming a payee other than the company may lead to insufficient premiums for the life policy and eventual policy lapse.
Generation Legacy® – One Person
The SPIA’s annuitant and the life policy’s insured are the same person. If the annuitant dies during the SPIA payout period, the whole life and SPIA beneficiary will receive scheduled unpaid SPIA payouts until the SPIA duration ends, in addition to the Generation Legacy® whole life insurance immediate death benefit. However, the beneficiary may elect to receive the commuted value of future unpaid SPIA payouts in a lump sum. SPIA payouts to the beneficiary will be all or partially taxable to the beneficiary depending on whether the SPIA is an IRA or non-qualified. If death occurs after the SPIA payout period has ended, the beneficiary will receive the whole life insurance death benefit.
Generation Legacy® – Spouse Option
This option is ideal for situations when one spouse cannot qualify for life insurance. One spouse is the annuitant, the other is the life policy insured. If the annuitant dies during the SPIA payout period, the SPIA beneficiary may continue to have SPIA payouts made a premium toward the life insurance policy or to elect to receive scheduled future SPIA payouts. The beneficiary may not elect a commuted value of future SPIA payouts.
The annuity payout period and life policy premium period are based on the life insured’s age 60-80. The annuitant’s age for this spouse option may be 60+.
|Ages 60-74||Ages 75-80
|10-year Limited-Pay Life||7-year Limited-Pay Life
|10-year Annuity Payout||7-year Annuity Payout
Non-qualified annuities and qualified funds are ideal funding sources for the SPIA. When traditional IRAs or other types of qualified funds are transferred, the funds will be placed into a SPIA IRA. Any non-taxable transfers of traditional IRAs and other qualified funds must qualify as acceptable direct transfers or rollovers to an IRA as provided by the Internal Revenue Code.
Death of Annuitant
If the annuitant dies during the SPIA payout period, the whole life and SPIA beneficiary will receive scheduled unpaid SPIA payouts until the SPIA duration ends, in addition to the Generation Legacy® whole life insurance immediate death benefit. However, the beneficiary may elect to receive the commuted value of future unpaid SPIA payouts in a lump sum. SPIA payouts to the beneficiary will be all or partially taxable to the beneficiary depending on whether the SPIA is an IRA or non-qualified. If death occurs after the SPIA payout period has ended, the beneficiary will receive the whole life insurance death benefit.
In almost every case, your client, the SPIA contract owner, will be taxed on a portion of each payout from the SPIA. Non-qualified annuities: When NQ annuities are 1035 exchanged to the SPIA, part of each SPIA payout will be a non-taxable return of your client’s cost basis. The remaining portion of the payout represents gain which is taxable. For each SPIA payout, your client will receive a 1099 from the company stating the taxable portion. The company will also report the taxable amount to the IRS. Qualified funds: The SPIA payout will be fully taxable as ordinary income. Your client will receive a 1099 for each year’s taxable amount and the company will report the taxable amount to the IRS.
IRA contracts are subject to a requirement called Required Minimum Distributions (RMD) when your client reaches age 70½. A minimum amount must be withdrawn from the IRA each year to satisfy the RMD requirement. The annual payout from your client’s Generation Legacy® SPIA will satisfy the RMD requirement for the SPIA IRA, but may not satisfy distributions from your client’s other IRAs or qualified plans.
Regardless of the source of funds transferred to the SPIA, qualified or non-qualified, once each SPIA payout is made and your client recognizes taxable portion of the payout, the life premium is considered “after tax” funds and the life policy is considered non-qualified.
In the application, your client may elect whether or not to withhold tax from each SPIA payout. However, electing to withhold tax will negatively impact the performance of Generation Legacy®. Baltimore Life will not accept applications where your client has elected to withhold tax. Withholding tax from each SPIA payout reduces the amount of premium funding the life insurance policy and decreases the face amount otherwise provided. The amount withheld can vary annually which would also cause a deviation in amounts between the SPIA payout and life premium. A deficiency in life premium may require additional premium payments from your client. If premium deficiencies are left unpaid, your client’s life policy could lapse.
Simply elect “I DO NOT want tax withheld from your annuity” by checking the box in Question 1 in the Notice of Withholding and Election section of the application. Do not complete Question 2; leave it blank.
Regardless of your client’s desired withholding election, the tax impact of the SPIA should always be disclosed. Advise your clients to consult with their personal tax advisor with questions regarding the taxation of a SPIA.
Loans are available on the whole life policy of the Generation Legacy® product. The maximum loan is an amount that, with interest to the end of the current policy year, will not exceed the net cash value at the end of that current policy year. Loan interest will not exceed an annual rate of 8.00%. The minimum loan repayment is $25, unless the loan balance is being fully paid.
The whole life policy can be surrendered at any time for its net cash value. The net cash value is the cash value of the policy less any policy debt. The policy will terminate at the time of a full surrender.
A partial surrender from the whole life policy can be exercised at any time after the premium payment period. The minimum partial surrender benefit is $500. The maximum partial surrender benefit is the available partial surrender amount, less $5,000.
The available partial surrender amount is equal to the net cash value of the policy less any loan interest to the end of the current policy year for each partial surrender. You can only make one partial surrender in any given policy year. There is a $25 fee.
Point-of-Sale Underwriting Decision Process
You will pre-qualify your client using the application, which has been designed to help you classify your client’s risk profile.
Once you have completed the pre-qualification, you’ll contact the call center for an underwriting interview. This point-of-sale interview generally lasts 12 minutes or less, so you spend less time on the phone. Any underwriting decision is communicated to you, the agent, NOT to your client. The professional call center representative will review the exact same health questions you used during the pre-qualification. During the call, an MIB search and a prescription drug database search will be run “in the background.” If there are discrepancies between those results and the answers provided in the interview, your client may be asked a question from the application again in an attempt to clarify the difference in information. This process reduces the need for an APS and allows Baltimore Life and our agents to keep point-of-sale decision rates high. After your client has completed the interview, the call center representative will provide you with an underwriting decision of either “approved” or “not approved.”
Fewer than 10 percent of the cases are referred to the home office for additional underwriting review.