Estate Planning: An Opening for Bank Sales?

Article excerpt

Banks are still small players in the market for estate planning life insurance, but insurers say more are showing an interest.

Joe Donovan, the vice president of estate and insurance services for John Hancock Financial Services in Boston, summed up the experience of others in the business: "Banks have become a major focus."

For clients, estate planning is a complex part of financial planning. For banks and trust departments, selling insurance for these needs is a potentially lucrative source of fee income and a way to strengthen client loyalty.

Some insurers, through their wholesaling units, are training bank representatives, trust officers, and dedicated small-business officers on estate planning insurance. The topics range from recognizing a prospect to understanding how clients are affected by the complexities of a field that has only grown more confusing with Congress' decision this year to gradually raise the amount exempted from the estate tax until the tax is eliminated in 2010. But it would return to this year's level in 2011 and succeeding years unless Congress extends the repeal.

Mr. Donovan has stepped up Hancock's commitment to the insurance side of estate planning at banks. Since his arrival from the estate planning department of Manulife Financial Corp. in Boston a year ago, he has added 10 bank-dedicated wholesalers, all of whom are experts in estate planning life insurance.

The wholesalers work with the 22 life insurance wholesalers who are also dedicated to banks. "They'll come in on the sophisticated plans, which are usually estates in excess of $3 million," Mr. Donovan said.

"If you think about it, it makes perfect sense for banks to be big players in estate planning," Mr. Donovan said. "We run into a lot of very big cases through banks -- they have the investment relationship with individuals with estate planning needs. But it's still a start-up channel. It's small, but it's growing."

BB&T Insurance Services Inc., a Raleigh, N.C., subsidiary of $68.9 billion-asset BB&T Corp. in Winston-Salem, N.C., has offered estate planning insurance for close to 20 years.

As is true across the industry, its most popular policy for this need is second-to-die, or survivorship, life insurance, which is generally sold to couples or individuals to pay taxes on an estate larger than the exemption amount (currently $675,000 per individual or $1.35 million per couple). Estate taxes are not due until the second spouse's death, so the policy does not pay out until then. The policy is put into an irrevocable trust so that it stays outside the estate and is not counted when the second spouse dies. It saves heirs from having to sell parts of the estate to pay the tax (which can be as high as 50% of estate assets).

"By far it's our top-selling product," said Jim Farmer, chief financial insurance executive officer at the BB&T unit. …