August, 2002 Article Submission Journal Archives ABOUT FSO Financial Services Online (FSO) is the first and largest financial services publisher and portal on the Internet. Our publications include Financial E-News, Financial Services Journal Online and Messages From The Masters, which are available at no cost on our Portal http://www.fsonline.com ADDENDUM: This Newsletter is published by Financial Services Online, Inc. and distributed on a complimentary basis to members of NAIFA, subscribers of the Virtual Sales Assistant(TM) and selected other recipients. It is designed to provide financial service professionals an overview of the events and happenings that may affect their business. If you would like additional information on any items or the sources used, please e-mail us at e-news-list-admin@ e-news.fsonline.com Contact: Carolyn Hersman chersman@comcast.net Copyright © 2002 Financial Services Online. Reprints and/or permission to reproduce Financial Services Journal must be obtained in writing from the publisher, Financial Services Online. LEGAL NOTICE Please read these important legal notices concerning this publication About NAIFA Founded in 1890 as the National Association of Life Underwriters, NAIFA is comprised of 900 state and local associations and represents the interests of 90,000 life and health insurance agents and financial advisors nationwide. Many of NAIFA's members are NASD-licensed registered representatives or registered investment advisors. Benefits of membership include legislative and regulatory representation, education and training, and networking opportunities. The NAIFA umbrella includes the Division of Financial Advisors and three specialty organizations: the Association for Advanced Life Underwriting (AALU), the Association of Health Insurance Advisors (AHIA) and GAMA International.		PRUDENT PLANNING IN A CHANGING ENVIRONMENT by Earl R. Borders, III, CLU, ChFC, RFC, RHU, LUTCF, CRMS Secretary, NAIFA Division of Financial Advisors I am certain that we are each familiar with the adage that "the only thing constant is change" and certainly that is a very apt phrase when applied to the political or legislative process. With the recent signing of the legislation known as H.R. 1836 concerning the supposed repeal of the estate tax the question arises, what should the prudent planner do? Well, stop and consider what has occurred. The current piece of legislation doesn't repeal the estate tax outright but rather phases it out over a ten year time period. Do you suppose anyone subject to the tax will die in the next ten years? I think the answer is obvious. Therefore, a prudent person, especially one with sizable assets should still be encouraged to plan. Also, the enactment of this law was premised on projected surpluses in the federal budget. What if these should not materialize? The effects of this bill could be retarded or even reversed by further congressional action. What about the change in the political complexion of the Senate. Could the new majority party revisit this issue? No doubt it is likely at some point. Consider the fact that this legislation eliminates the estate tax effective January 1, 2010, but has a sunset provision that reinstates the tax January 1, 2011. What is the prudent planner to do? The best course of action is to always err on the side of caution. In other words in seaman's parlance "steady as she goes." To plan and to prudently prepare is far more advisable than to fail to plan only to discover at the last moment that it was drastically needed. The convoluted repeal of stepped-up basis is another viable reason for continued planning. In 2010 the stepped-up basis is repealed with an allowance of $1.3 million to continue to receive stepped-up basis ($3 million in addition for a spouse). However, this is for 2010 only! Utilizing life insurance as an instrument to create cash liquidity for an estate only creates the pleasant problem of what do you do with the extra money available if not needed for estate taxation purposes. What a pleasant problem to have! And much preferred to "where will we get the liquidity, I didn't think it would be necessary". Using flexible policies with adjustable benefits can also help adapt the coverage to a changing environment. Periodic review of plans and policies can make revisions as necessity dictates. As with all life insurance planning, the prudent thing to do is to base your initial calculations assuming the insured dies tonight. What does a prudent planner do in changing times? Keep planning! Earl Borders. is a graduate of the University of Kentucky and holds a degree in the liberal arts and sciences. He is the executive vice president of Hoovler Financial and Insurance Services in Reynoldsburg, Ohio, a firm which specializes in estate and financial planning. Earl is also president of Hoovler-Borders Ventures, Inc. Earl is extremely active in several professional associations. He is a past two-term president of the Licking-Knox Association of Insurance and Financial Advisors, and currently serves as a state trustee, state leadership development chairman and chairman of the Banking Community Task Force Committee with the Ohio Association of Insurance and Financial Advisors. He is immediate past state membership chairman and a past community service chairman. He is also the secretary of the board of directors for the National Association of Insurance and Financial Advisors prestigious Division of Financial Advisors and also serves as a core committee member of NAIFA's national membership committee. Earl serves as the secretary of the Tri-County Estate Planning Council in Pickerington, Ohio and is also on the program committee of the Columbus Chapter of the Society of Financial Service Professionals. He also holds memberships in the International Association of Registered Financial Consultants and the Association of Health Insurance Advisors. Currently Earl holds six professional designations encompassing vast studies in the fields of insurance, financial and estate planning. He has received numerous awards and recognition from various companies for leadership in production. In his first full year in the industry he ranked 15th in life production for all first year producers in the United States, Canada, The Canal Zone and Puerto Rico with the Mutual of Omaha Companies. Earl has been quoted in such publications as: Life Association News, Advisor Today and Business First Magazine and has the distinction of being commissioned by the Governor of Kentucky as a Kentucky Colonel and is a member of the Honorable Order of Kentucky Colonel's. Earl resides in Newark, Ohio with, his wife of twenty-six years, Sandra and their five children.