CASE NO. 1: The retired physician

The first case I ever used the CLPR with was a retired physician. He wasn’t my client at the time. We struck up a conversation at the clubhouse coming off the golf course.

He had $8.5 million in assets and two $2 million term policies, both expiring in less than 10 years. He was considering an expensive second-to-die policy.

I hadn’t used the CLPR before, but it seemed to apply perfectly in this case. The doctor was enthusiastic when I brought it up. In fact, he said, “Why didn’t my insurance agent mention this?”

Since I didn’t know the doctor personally, I had no idea how the longevity evaluation was likely to come out.

It turned out that he had a 50% probability of surviving to age 86 – and a 30% chance of surviving to 90. Well beyond the terms of his current life insurance policies. His estate, balancing good years with lean years, was likely to grow at an average 7%. That would put it at well over $12 million by the time he was 86. It was clear that his planning focus should be on the potential estate tax burden.

I recommended that he convert one of the term life insurance policies now and purchase a second-to-die to age 100 – which, by the way, saved him money, because he was originally thinking he should buy a to-age-110 policy. His CLPR showed that being that conservative was unnecessary.

The bottom line?

Understanding the client’s life expectancy put the focus on the real need: $8.5 million in assets X 18 years X 7% growth = big estate tax problem

I gained insight into products to recommend, which led to his getting the coverage he really needed at the best possible price.

The physician valued the insight of the life expectancy evaluation, and my recommendations were completely credible.

CASE NO. 2: The long-time client

This case involved a long-time client. She’d been retired for 15 years, and widowed for 10. She had about $2.7 million in assets and then, when her mother died, the client received another $1.5 million.

Now she has a net worth of about $4.2 million. Her main concern is not for her own financial future but for her children and grandchildren. She wanted to know how she could manage her assets so as to be able to pass on as much as possible.

I wanted to make sure she wasn’t going to need her money to meet her own needs in old age. Again, I wanted the insight the CLPR could provide into her likely longevity.

When the CLPR report came back, I learned that her life expectancy was 59% shorter than average. I was surprised and dismayed. Though I had known her for years and had made her more than a million dollars, I didn’t know the details of her health that were driving her life expectancy numbers. She, of course, knew very well about her health conditions and how they were likely to affect her longevity. The life expectancy projection didn’t shock her at all.

The bottom line?

The CLPR put her real needs in sharp focus. With a life expectancy 59% shorter than standard, the client needed to focus on her will and trusts, making sure assets will flow the way she wants after her death.

Her family is already uppermost in her mind when she thinks about the financial future. I recommended she accelerate her gifting program – so she gets to see her heirs enjoying her wealth while she’s still alive.