Whose estate is it, anyway?
By Steven Kobrin
Steven H. Kobrin, LUTCF
I am a second-generation life insurance salesman. I enjoy making big money on big cases. But I am a consumer, a citizen and a taxpayer first. I think it is unfair for government and industry — my government, my industry — to conspire against me. I think the estate tax should be repealed.
Those who sell life insurance for estate preservation typically portray the government as the bad guy. They demand to know: ”Why should Uncle Sam get half the assets of your estate? You should be able to keep your properties, businesses and valuables in the family. Buy life insurance so your heirs can use its proceeds to pay the tax bill. They won’t have to sell the family jewels.”
“What’s yours is yours” is a good selling point. The argument is bolstered by the cost-effectiveness of the product. Every dollar of benefit literally costs pennies in premium. Paying taxes due with life insurance makes much more financial sense than does paying the bill dollar-for-dollar out of available cash. It certainly is a better deal than liquidating assets at a loss, just to pay the government.
This sales strategy has enormous moral appeal. Life insurance is a noble tool for preserving liberty — an economical defense-mechanism against big government. Even if the prospect has not been entirely thought out in terms of all the larger issues involved — constitutional authority, the agenda of wealth redistribution, etc. — the idea of paying the taxman along with the undertaker rubs people the wrong way. It looks too much like grave robbing, especially since taxes will have already been paid on a large amount of the assets that are being assessed with the death tax. Whose estate is it, anyway?
Some brokers take a morally neutral position when selling life insurance for this purpose. The injustice of the tax is left out of the sales appeal; it becomes simply a matter of the best way to meet a pending obligation. “Let’s let the politicians and lobbyists fight it out in Washington,” we say. “I am here just to help you solve your financial problems.”
However, the moral tone of this situation changes if the life insurance industry advocates for the preservation of the estate tax. When lobbyists fight to make sure family survivors keep getting death tax bills, we salespeople can no longer point to the government as the sole bad guy. Our own companies are, after all, conspiring with the authorities to secure market share.
Even those brokers who want to take a neutral position cannot do so because of the political activism of the industry. It was easy to stay politically neutral when the politicians and lobbyists were nameless big wigs causing the problems we financial guys were here to solve. But when the big wigs are our own paid lobbyists, then we really cannot claim innocence. Like it or not, our industry is helping to create the very tax problems we are then offering to solve with life insurance. Let’s take a look at this situation for a second. Is there anything wrong with profiting off of big government? No. Consumers and business people have an overwhelming number of regulations with which we have to comply. Thankfully, we have a multitude of industries that have formed to help us do so. Hence all the insurance, legal and planning companies showing us how to avoid and minimize taxation.
Is there anything wrong with lobbying the government for policies and legislation that increase profits? No. The burden of government regulations squeezes the surplus out of businesses — and the cash out of individuals. Thankfully, we have a country in which the private sector can push back to create a more favorable economic climate. Hence the professional and activist organizations that maintain an industry presence in Washington and in state capitals.
But is there anything wrong with big companies petitioning big government to mandate a need for those profits? Yes, indeed there is. When insurance carriers push the government to impose the tax on us and then sell their products to help us pay for it, life insurance is no longer used to defend liberty; it becomes a tool to make government intrusion as affordable as possible. The companies benefit, the bureaucrats benefit, but the consumers still lose. We have to shell out money for life insurance just to protect and pass on what is rightfully ours. Whose estate is it, anyway?
So much for the moral luster of selling life insurance for estate preservation.
I am a second-generation life insurance salesman. I enjoy making big money on big cases. But I am a consumer, a citizen and a taxpayer first. I think it is unfair for government and industry — my government, my industry — to conspire against me. I think the estate tax should be repealed. My heirs and the charities of my choice would get to keep more of my money. (Believe me, we could do very good things with it. No need for the feds to force us.) The government would get cut down a bit closer to its normal size. And the insurance industry would get a bit more honest. A ton of life insurance could still be sold to protect the surviving spouses and children — and the retirees, the businesses and non-profits.
It is, after all, my estate.
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