Insuring a Good Defense

Katt, Peter C.
March 2005
Journal of Financial Planning;Mar2005, Vol. 18 Issue 3, p32
Academic Journal
This article discusses how financial planners can help their clients avoid life insurance/annuity mistakes. In this article, the author deals with three specific issues that financial planners should be aware of: death futures schemes, personal equity plan and variable annuity retirement riches. According to the author, death-futures schemes are complicated. He notes that it is an ethical abomination to solicit well-off elderly persons to convince them to buy large life insurance policies they do not need or want, only to relinquish the policies to profit-seeking third parties in two years. Regarding personal equity plans, the author relates that he has reviewed personal equity plans for three doctors in 2004. According to him, at least for the plans he has reviewed, a pretend loan from a third party is used to claim legitimacy for the payment of large tax-deductible interest payments by the doctors' corporations to the insurance company. Meanwhile, the author warns that an underfunded early retirement using aggressive and arithmetic mean investment return assumptions is very risky at any time. He advises financial planners not to entice folks into early retirement using the high returns of equity investments and flawed financial math.


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