for financial professional use only – not for public distribution foreign national marketplace...
TRANSCRIPT
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FOR FINANCIAL PROFESSIONAL USE ONLY – NOT FOR PUBLIC DISTRIBUTION
Foreign National Marketplace
[Presenter’s Name][Email][Phone]
Policies issued by American General Life Insurance Company
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FOR FINANCIAL PROFESSIONAL USE ONLY – NOT FOR PUBLIC DISTRIBUTION
Why AIG?
Began in 1919 as American Asiatic Underwriters in Shanghai, China
1930-39: Operations expand in China and operations begin in Latin America
1940-49: New Markets including Japan and Germany
1950-59: UK and Australia markets opened
1960-69: American International Group formed
1990: AIG returns to its roots in China with the issuance of the first foreign license issued by the Chinese Government in 40 years
2013: AIG entered a joint venture with PICC Life to provide Chinese consumers life insurance and other financial products to enhance and protect their overall quality of life
Chronicling over 95 years
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Technology has made the world smaller
Large, growing population
Foreign Nationals face unique U.S. planning challenges
Significant need for information on strategies and planning
Why Consider
the Foreign National Market?
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Foreign Nationals need YOU!
AIG will prepare you for a growing opportunity with the foreign national market segment that purchased $92 Billion of real estate in 20141
Foreign Nationals come to the U.S. for mature insurance and investment markets seeking estate planning help
Their mean home price is $396,180 versus $247,417 for U.S. Existing Home Sales
Some global jurisdictions offer negligible or no Life Insurance options. The U.S. is an attractive insurance marketplace.
Source: 1) 2014 Profile of International Home Buying Activity, Realtor.org, Lawrence Yun, Senior Vice President & Chief Economist
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Look at the numbers…
Asian Americans
Buying power projected to be $1 trillion by 2017
45% currently WITHOUT Life Insurance
8 in 10 Value Life Insurance
Median Household income of $72,528 (15% higher than the overall U.S. median.
High rate of business ownership
Source of Slide: Pew Research Center analysis based on Elizabeth M. Hoeffel et al., The Asian Population: 2010, Census Bureau, March 2012.
The Largest U.S. Asian GroupsThe six largest country of origin groups each number more than a million people
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People are People
Concerns are the same– Pass wealth to the next generation
– Protect their Family
– Replace income
– Protect wealth
No matter your origin…people have the same needs…
NCOA.ORG/IMPROVE – HEALTH/CENTER-FOR-HEALTHY-AGING/CHRONIC-DISEASE. SEPTEMBER 2014 CIRC.AHAJOURNALS.ORG/
CONTENT/ EARLY/2013/12/18/01.CIR.0000441139.02102.80 2013
Americans’ Perspectives on New Retirement Realities and the Longevity Bonus, a 2013 Merrill Lynch
Retirement Study, conducted in partnership with Age Wave
72%
Of retirees say serious health problems are the #1 worry about living a long life.
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But Foreign Nationals are treated differently…
Foreign National have additional Concerns– Tax law is different from U.S. Citizens
– Substantial Tax Risk
– Gifting
– U.S. Insurance Market is mature
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Foreign National Marketplace
“Life Knows No Boundaries”
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Where are Foreign Nationals?
New York
West Palm Beach
Washington, DC
Seattle
Los Angeles
Sacramento
Las Vegas
Phoenix
Dallas – Fort Worth
Boston
Colorado Springs
Denver
Minneapolis
Houston
Detroit
Sarasota
Tampa
Orlando
Miami
Atlanta
Philadelphia
(1) Migration Policy Institute, “Frequently Requested Statistics on Immigrants and Immigration in the United States.” Migration Policy Institute, Feb. 26, (2) Geoscape national DMA report 2013, The foreign-born population includes anyone who was not a U.S. citizen or a U.S. national at birth. This includes respondents who indicated they were a U.S. citizen by naturalization or not a U.S. citizen. (U.S. Census Bureau, American Community Survey 2007 Subject Definitions).
+99%
+86%
+92%
+85%
+82%
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Understanding Needs
Foreign Nationals fall into two categories:Resident Aliens
Non-Resident Aliens
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ResidentAliens (RA)
Foreign National with a permanent U.S. home.
Worldwide assets subject to U.S. estate and gift tax
Denied certain tax advantages available to U.S. citizens
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Foreign National with a permanent home in another country.
Only U.S. assets subject to U.S. estate and gift tax
Non-ResidentAliens (NRA)
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Are you and your spouse U.S. Citizens?
Where do you spend most of your time?
Where do you consider home to be?
Do you own a home in the United States?
DeterminingResidencyStatus
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What is my status for U.S. income tax purposes?
Do you possess an alien registration card (green card)?
Were you physically present in the U.S. on at least 31 days during the current year?
Were you physically present in the U.S. on at least 183 days during the 3-year period that includes all days in the current year, plus 1/3rd the number of days in the prior
calendar year, plus 1/6th the number of days in the 2nd previous calendar year?
Do you still meet the 183 day test if you disregard exempt days?Exempt days are days you are: (1) commuting to work from Canada or Mexico; (2) in the U.S. for less than 24 hours; (3) in the U.S. as a crew member of a foreign vessel;
(4) unable to leave the U.S. due to a medical condition; (5) an exempt individual.
Were you physically present in the U.S. on at least 183 days during the current year?
During the current year, did you maintain a tax home in a foreign country in which you had a closer connection than with the U.S.?
You are a non-
resident alien (NRA)
for U.S. income tax purposes
You are a resident
alien (RA) for U.S.
income tax purposes
Yes No
Yes
Yes
Yes
Yes
Yes
No
No
No
No
No
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Non-resident Alien (NRA) Underwriting Guidelines – Permanent Insurance Only
Is the prospect a non-resident alien?(A non green card holder residing outside the U.S. or visiting the U.S. temporarily)
Does the prospect have documented substantial contacts with the U.S.?
Is the prospect in the U.S. for a purpose other than to buy insurance and has a U.S. bank account?
Does the prospect meet one of the following requirements?(1) Own real property in the U.S.; (2) Has ongoing business activities in the U.S.; (3) Maintain investment interest in the U.S.; (4) Employed by a U.S. based company; (5)
Annual travel to the U.S. to visit immediate family; (6) Annual travel to the U.S. to manage financial or real estate assets; (7) Regular travel to the U.S., at least 15 days
minimum, for doctors visit.
Did all solicitation take place in the U.S.?
Is prospect a visa holder intending to reside in the U.S. permanently?
Prospect is not
Eligible for Coverage
Prospect may be
Eligible for Coverage (additional
requirements must be
satisfied)
Yes No
No
YesNoYes
Yes No
Yes No
Yes
No
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Worldwide assets subject to U.S. gift and estate taxEstate and gift tax exclusion:
$5,430,000
Annual gift tax exclusion: $14,000 ($147,000 for non-citizen spouse)
Resident Aliens
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U.S. situs property subject to U.S. gift and estate taxGift tax on gifts of real or
tangible personal property located in the U.S.
Estate tax on tangible and intangible property situated in the U.S.
Estate tax exclusion: $60,000
No unlimited marital deduction for non-citizen spouse
Non-Resident
Aliens
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U.S. Estate Tax Comparison
*U.S. situated property include: real and tangible personal property located in the U.S. as well as certain intangible property deemed situated in the U.S. (example, stock issued by a U.S. corporation)
Resident Alien (RA)
Non-Resident Alien (NRA)
Lifetime estatetax exemption
$5,430,000 $60,000
Top estate and gift tax rate 40% 40%
Unlimitedmarital deduction
Only if inherited assets are transferred
to QDOT
Only if inherited assets are transferred
to QDOT
Assets subjectto U.S. estate taxes
All worldwide assetsProperty situated or deemed
situated in the U.S.*
Gift tax annual exclusion amounts
$147,000 for RA spouse and $14,000 for non-spouse
$147,000 for NRA spouse and $14,000 for non-spouse
Assets subject to U.S. gift taxes
All worldwide assetsReal or tangible personal property
situated in the U.S.
Footnote: There are special rules applicable to recent expatriates.
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U.S. Tax Considerations for Foreign Nationals
*A gift of a life insurance policy on oneself may be subject to the IRC §2035 look back rule, and therefore may be subject to estate taxes if included within the decedent’s estate.
Type of property transferred
Subject to U.S. Gift tax
Subject toU.S. Estate tax
Real property located in U.S. Yes Yes
U.S. tangible personal property (i.e., cash, jewelry, paintings, automobiles)
Yes Yes
U.S. intangible personal property (i.e., stocks in U.S. corp., interest in U.S. partnership)
No Yes
Ownership interest in a U.S. life insurance policy on oneself
No* No
Annuities in U.S. only No Yes
Currency in U.S. safe deposit box Yes Yes
Cash deposit in bank (checking/savings) Yes No
Retirement plan benefits in U.S. only n/a Yes
Stock in U.S. corporation No Yes
ADRs No No
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FOR FINANCIAL PROFESSIONAL USE ONLY – NOT FOR PUBLIC DISTRIBUTION
Qualified Domestic Trust (QDOT)Additional material you may want to know
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QDOT (Qualifying Domestic Trust)
No immediate estate taxation
Assets “stuck” in U.S.
Distributions limited to income and hardship OR immediate estate taxation
Need U.S. trustee, may require bond
Tax liability is not solved upon death of trustee
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FOR FINANCIAL PROFESSIONAL USE ONLY – NOT FOR PUBLIC DISTRIBUTION
Planning and Case Studies*
* The stories are not actual cases, and are hypothetical representations for illustrative purposes only.
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Case Study 1Meet Desi and Grace
Will help you understand:
• Non-Resident Aliens with U.S.-based assets
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Meet DESI and GRACE
Chinese Citizens No intent to remain permanently in the U.S. Couple recently purchased a home in California for the
benefit of their two children who do intend to permanently reside in the U.S.
Meet Desi and GraceProfile:Desi – Age 58Grace – Age 56
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Upon further inquiry…
Desi Separate Property• LA Home $3.5M• Investment Portfolio $2.2M• Personal Property $300K
Desi and Grace Joint Property• Real Property $25M• Cash and Investments $8M• U.S. Bank Deposits $500K*
* Note that the $500,000 cash deposit at a U.S. financial institution is not considered U.S. situs property for estate tax purposes.
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Concerns
After application of available estate exemption: $60,000 ($13,000 credit equivalent) 40% tax rate is applied
Net U.S. assets after estate tax: $3,613,000
Total U.S. Assets - $6,000,000
Potential U.S. estate tax liability:
$2,387,000
* Note that the $500,000 cash deposit at a U.S. financial institution is not considered U.S. situs property for estate tax purposes.
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Potential Solution: Secure Lifetime GUL 3(Guaranteed death benefit to age 121)
Annual premium to be paid by Desi is $44,067*
At Desi’s passing, $3 million is available to offset estate tax liability of $2,387,000
Desi can own the policy individually and name Grace and/or the children as beneficiary. Life Insurance proceeds (from U.S. carrier) on the life of a nonresident decedent are not subject
to estate taxes.• Exclusion applies even when the policy is directly owned by the nonresident decedent
Desi buys life insurance policy with guaranteed death benefit: $3,000,000
Estate Value (after tax)
Before Life Insurance After Life Insurance
$3,613,000 $6,613,000
Premiums paid during lifetime will help reduce the value of the assets subject to estate tax at death.
*Premium based on Male, 58, Preferred Non-tobacco, no-lapse guarantee premium for $3,000,000 level DB guaranteed to Age 121.
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Case Study 2Brian, Jennifer and their Three Children
Will help you understand:
• Resident Aliens with significant U.S. and Worldwide Assets
• Married Couples with a Foreign National Spouse
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Brian (U.S. National) and Jennifer (Taiwanese National with a green card) – Multi-National Couple
Three Children – U.S. Nationality
Brian wants to keep the business in the family and the children to inherit the business
following his and Jennifer’s passing.
The Family
$25 Million Business
Brian, Jennifer and their Three Children
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Three Options – One Potential Solution
1. Do Nothing
Exposed to Current Estate Tax Liability of
$7,882,200
Potential company liquidation
2. QDOT
Excess amount beyond Brian’s
exemption transferred to a
QDOT
Only defers taxes during
Jennifer’s lifetime
3. LifeInsurance
Annual gifts to spouse
Jennifer purchases life
insurance
Following Brian’s death, Jennifer will continue to rely on the business to support her lifestyle.
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Option 2:
QDOT – Tax deferred until 2nd death
The potential estate tax liability is not solved but simply deferred until Jennifer’s death.
Brian
$5,430,000 Available
Exemption
Direct Transfer to Jennifer or
Trust
$19,570,000
Remaining Assets
QDOT
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Guarantees death benefit of $10 million$94,492* annually
Brian gifts to Jennifer
Option 3:
Gifts & Life Insurance
Secure Lifetime GUL 3
$10 Million Death Benefit Received free of income and estate tax Available to support Jennifer and children Provides liquidity to meet eventual estate tax obligation
*Premium based on Male, 50, Preferred Non-tobacco, no-lapse guarantee premium for $10,000,000level DB guaranteed to Age 121.
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Driving the OpportunityWe are here to help…
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Next Steps
• Review your book of business
• Reach out to contacts that match the client profile
• Strengthen and build your referral network
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• Immigrant clients?
• Clients with immigrant spouses?
• Develop a champion client
Look at Your Existing Business
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Look at Your Neighborhood
• Nearby colleges/universities?
• Nearby hospitals?
• Nearby military bases?
• Talk to realty firms for leads
• Align with immigration and/or international tax attorneys
• Network with ethnic business associations
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Awareness = OpportunityOther things to keep in mind
APPENDIX
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Love Knows No Boundaries…
Source: "Legal Hassles of Global Love Affairs” Wall Street Journal, Summer 2013
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Real Estate
Sales ($) % Share Sales ($) % Share Canada $11.8 17% $13.8 15%China $12.8 19% $22.0 24%Mexico $3.6 5% $4.5 5%India $3.9 6% $5.8 6%United Kingdom $4.2 6% $5.8 6%
Total International Sales $68.2 $92.2
Estimate of International Sales from Major Buyers
2013 2014 ( In Billion Dollars)
International Buyers: 7% of $1.2 Trillion MarketFive Countries: 54 Percent of Total International Sales
Source: “2014 Profile of Intenational Home Buying Activity”, Realtor.org, Lawrence Yun, Senior VP & Chief Economist
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Real EstateCanada Leads in Number of TransactionsChina Leads in Dollar Volume
Source: “2014 Profile of Intenational Home Buying Activity”, Realtor.org, Lawrence Yun, Senior VP & Chief Economist
Brazil Canada China* France Germany India Japan Mexico Russia United Kingdom
2010 0.01 0.23 0.09 0.03 0.04 0.05 0.01 0.1 0.03 0.09
2011 0.03 0.23 0.09 0.04 0.04 0.07 0.02 0.07 0.01 0.07
2012 0.03 0.24 0.12 0.03 0.03 0.06 0.01 0.08 0.02 0.06
2013 0.0197044334975369
0.22824302134647
0.119868637110016
0.0197044334975369
0.0311986863711002
0.0541871921182266
0.00821018062397373
0.0821018062397373
0.0164203612479475
0.049
2014 0.021 0.188 0.164901664145235
0.021 0.032 0.054 0.02 0.086 0.012 0.05
3%
8%
13%
18%
23%
28%
Distribution of International Transactions by Country of Origin
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Real EstateForeign Sales tend to be at Higher End of Market
Source: “2014 Profile of Intenational Home Buying Activity”, Realtor.org, Lawrence Yun, Senior VP & Chief Economist
2009 2010 2011 2012 2013 20140%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
51%56% 54%
45%54%
46%
30%28% 28%
30%
23%29%
12% 10% 13%
15%15%
16%
7% 7% 5%10% 7% 9%
Purchase Price(Percentage Distribution)
up to $250,000 $250,001 to $500,000
$500,001 to $ 1M $ 1M up
Per
cen
tag
e o
f R
esp
on
den
ts W
ith
Cli
ents
Mean Price Median PriceU.S. Existing Home Sales $247,417 $201,700International Sales $396,180 $268,284
Average Mean and Median Prices from April 2013-March 2014
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For More Information,
Contact:
[Presenter’s Name][Email][Phone]
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Policies issued by American General Life Insurance Company (AGL) except in New York, where issued by The United States Life Insurance Company in the City of New York (US Life). Issuing companies AGL and US Life are responsible for financial obligations of insurance products and are members of American International Group, Inc. (AIG). For Policy Forms ICC12 AGLA 12UCG and AGLA 12UCG. Products may not be available in all states and product features may vary by state.
FOR FINANCIAL PROFESSIONAL USE ONLY – NOT FOR PUBLIC DISTRIBUTION