OUR PROCESS

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CPA firms are a critical part of the estate planning process.  Because they provide tax advice and then produce the annual tax returns for the client and the client’s business entities, they usually know more about the client’s financial affairs than any other advisor.  Therefore, Blue Star encourages the client to have their CPA do a final review of any new plan recommendations.  In addition, estate planning life insurance is typically owned in trust (which means that yearly accounting must be done for any new trust entities).  Finally, there are often premium funding structures (such as discounted seller notes) that require annual administration which is usually done by the client’s existing CPA firm.

Here is the Blue Star recommended process for how we can help CPAs serve their clients:

1. Don Prehn, President of Blue Star, has an initial phone call with the CPA to review Blue Star’s financial modeling capability and show some case studies of when life insurance was used to help clients reduce or fund estate tax liability.  The CPA then determines if any of these services could possibly be useful to any of their clients.
2. For any client where Blue Star’s financial modeling/life insurance services are possibly useful, Don Prehn and the CPA schedule a 20 to 30 minute introductory call with the client to get some general information about the estate.  All client information is confidential.  If requested, Blue Star and Don Prehn will sign an NDA.
3. Next, Blue Star creates a customized financial model for the client with a forecast to determine what estate tax liability (if any) the client's estate might have between now and some point in the future.  (Some clients want this analysis run to age 90 or 100, other clients want it run all the way out to age 120.)  If there appears to be a future tax risk to the client, Blue Star develops a number of alternative solutions to solve the tax problem (which may or may not involve the use of life insurance).
4. Don then schedules a second follow-up call with the CPA to discuss the alternative solutions.  The CPA determines if any of these options should be presented to the client.  If so, then Don and the CPA explain the different options to the client and request that the client authorize them to explain these proposed solutions to the client's existing estate planning attorney.  Also, if the client doesn't have an existing estate planning attorney, Don can refer a couple good firms in the client's geographic area.
5. Next, Don and the CPA (if desired) meet with the client's estate planning attorney and review the plan options.  Once completed, the CPA and the estate planning attorney work out the final plan recommendations and then a follow-up call is scheduled with the client.  On this call is the client, the CPA, the estate planning attorney, Don and possibly one of Don's tax/legal specialists.
6. If the client approves any of the solutions, then Blue Star works with the client to apply for life insurance (if applicable) and the estate planning attorney starts drafting the necessary legal documents (grantor trusts, family foundations, etc.).
7. The client is only responsible for paying for time billed by their own advisors.  This typically includes the client's existing CPA and their estate planning attorney.  In about 50% of new estate planning cases, new life insurance is recommended as part of the overall plan recommendation.  The reason for this is that life insurance is an effective and straightforward tool for creating estate liquidity without causing additional income or estate tax liability.  This liquidity gives the estate flexibility, control and leverage in a myriad of important areas including funding taxes, covering administrative expenses, allowing more time for the orderly sale of business, private equity or real estate assets, equalizing estates between children that may work in the family business and those that don't, etc. etc.  In any case, if new life insurance is purchased then Blue Star is paid by the insurance company.  Blue Star does not charge consulting fees to the client.
8. In about half the client cases, Blue Star recommends to advisors and their clients that they should NOT purchase life insurance.  This is due to the fact that in some client circumstances, new life insurance is unnecessary or there are more cost effective ways to solve a particular planning problem.  We advise clients this way because it’s the right thing to do and also because our guiding principle is to do everything in our power to earn your trust as your expert, unbiased source for life insurance information.
9. Blue Star can also review any existing life insurance policies owned by the client to make sure they are continuing to provide the best possible results (often not the case).  To help us with this policy review assessment, Blue Star has a close relationship with Veralytic, an independent life insurance research company.  The way this works is that the client provides us with some basic information about their policy.  Then, Blue Star pays for a customized Veralytic report which compares their existing policy to every other life insurance product currently available in the marketplace.  Importantly, this report summarizes results with a 5 star rating system showing how the policy compares to other products in each of the following categories:

A.    Financial strength of the insurance company

B.    Competitiveness of policy costs

C.    Stability of pricing offers based on historical behavior

D.    Accessibility to cash values (i.e. restrictions on distributions, surrender charges, etc.)

E.    Actual historical performance

We can then replace any existing policy with better products if (a) the policy is underperforming or not meeting the client’s current needs and (b) the client is still medically insurable.

Contact Us at Blue Star for more information