OUR PROCESS

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Mortgage bankers and mortgage brokers (“Mortgage Originators”) are critical advisors to those wealthy families with large real estate holdings.  Specifically, the need to refinance mortgages puts the Mortgage Originator at the center of the client’s financial world because (a) they know the current value of the real estate from periodic appraisals and (b) they are aware of the client’s complete financial profile required for mortgage lender underwriting.

As a consequence, Mortgage Originators are often more knowledgeable about the client’s true net worth than any other advisor and this makes them an excellent strategic partner for Blue Star. Specifically, as it pertains to estate planning, if the Mortgage Originator knows that the client’s net worth is at least $10 million, this reflects a situation where the client might benefit from Blue Star’s financial analysis and tax mitigation strategies.  (Clients with a net worth under $10 million have a much lower risk exposure to future estate tax.)

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

1. Don Prehn, President of Blue Star, has an initial phone call with the Mortgage Originator 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 Mortgage Originator 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 Mortgage Originator 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. Blue Star then 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 Mortgage Originator to discuss the alternative solutions.  The Mortgage Originator determines if any of these options should be presented to the client.  If so, then Don and the Mortgage Originator 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 Mortgage Originator (if desired) then meet with the client's estate planning attorney and review the plan options.  Once completed, the Mortgage Originator 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 would be the client, the Mortgage Originator, the estate planning attorney, Don and possibly the client’s CPA.
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 estate planning attorney and their CPA.  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 for the client (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