Wednesday, December 13, 2023
HomeFinancial AdvisorBenefactors Can 'Insure' Heirs' Legacy, Brokerage Executive Says

Benefactors Can ‘Insure’ Heirs’ Legacy, Brokerage Executive Says

As the Great Wealth Transfer takes hold, the benefactor generation should consider survivors’ insurance to protect and significantly enhance the money they can leave to heirs, according to Chad Druvenga, CEO of CBS Advisor, a brokerage firm based in Shakopee, Minn.

With the proper planning and an appropriate insurance product, the generation that created the wealth can grow a multi-million dollar estate by several million dollars, Druvenga said in an interview.

“Providing financial advice today means providing ancillary services. Increasing the amount of money that can be left to heirs is one of those services. The strategy also can cement a relationship with the second generation of a family,” he added. Reports have shown that second generations of wealth families often switch advisors when the first generation passes.

A recent UBS report showed that for the first time billionaires are inheriting more wealth then earning it, which is only the beginning of the Great Wealth Transfer that will involve all wealth levels, noted Druvenga, who specializes in insurance solutions tailored for high-net-worth and ultra-high-net-worth families facing the challenges of inherited wealth.

For the first time in nine annual editions of the report, billionaires have accumulated more wealth through inheritance than entrepreneurship, indicating that the great wealth transfer is gaining momentum, UBS said.

“This is a theme we expect to see more of over the next 20 years, as more than 1,000 billionaires pass an estimated $5.2 trillion to their children,” Benjamin Cavalli, head of strategic clients at UBS Global Wealth Management, said when the report was released in November.

Growing the amount that can be inherited – for all levels of wealth – is imperative to enhancing client outcomes and building relationships with the next generation, Druvenga added.

Druvenga provided an example of what survivorship insurance can do for a client. For a client he advises that has slightly more than $6 million in investable assets, he said the family agreed to allocate 2% of the growth of the assets for survivorship insurance starting at age 65.

“At age 87, assuming they receive 5% after tax returns on the portfolio, the client and their family are $4,412,262 better off at age 87 than simply investing the money for the next generation,” Druvenga said. “The growth not only protects the original insurance purchase price, but enhances the amount that available for heirs.”

A payment is made to the insurance each year from the growth of the portfolio. The amount in the insurance fund also grows organically over the years. Benefits are paid to the surviving heir or beneficiary upon the death of the benefactor.



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