Corporate Bonds w/Survivorship

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May 26, 2005 10:34 pm

Wondering what you guys knew about them.  Are there age limitations?  Ratings?  Who is the most suitable client for them...and what benefits do they provide?



Also - wondering if you had any ideas for wealth transfer strategies for a client over 90 years old with 200k or so in assets to transfer.  Too old for insurance, not a large estate or anything, just 200 sitting in cash.  Any strategy at all to employ to more efficiently transfer wealth?  Or just some A rated bonds to get a better return then a money market?

May 26, 2005 10:40 pm

Do you mean bonds with a "death put"?  If so, there are no age limitations but there is a limit on the dollar amount that the beneficary can "put" back to the company on an annual basis if death occurs.  The ratings can be anything from GMAC's current junk status to a high investment grade bond.     Short term bonds with a death put can be comforting to your client, I suppose, and give a better return.

May 27, 2005 8:32 am
babbling looney:

Do you mean bonds with a "death put"?  If so, there are no age limitations but there is a limit on the dollar amount that the beneficary can "put" back to the company on an annual basis if death occurs.  The ratings can be anything from GMAC's current junk status to a high investment grade bond.     Short term bonds with a death put can be comforting to your client, I suppose, and give a better return.



I agree. The rules vary from issuer to issuer on the details of the put. I use longer maturities with these than I otherwise might with an older client, chasing yield, knowing that the survivors won't get beat up by value declines when they pass to the heirs.


The downside, of course, is the very low YTB....

May 27, 2005 1:50 pm

Ok...I'll have to look into it.  What about those wealth transfer strategies I talked about?

May 27, 2005 3:25 pm

Maybe I'm misunderstanding your question, but what's the need you're trying to meet when looking for wealth transfer strategies for someone with a relatively small estate?

May 31, 2005 10:20 pm

Just anything that is more effecient that having money sit in a savings account...


I guess I could take the stance of conservative growth opportunities to make the most of what she has until she passes away via bonds...

May 31, 2005 10:44 pm

Also look at CDs, some issuers also provide the death put, so you can buy a 10 year or 7 year CD get a good yield for the client without principal risk and get paid, it is win-win.


Also, annuities provide principal protection and avoide probate, so the money passes direct to bene with no estate account or probate, also an attractive route.

Jun 1, 2005 9:55 am

This is getty scary.  The woman is in her 90's and someone's recommending annuities!!!  No wonder the NASD is hitting our industry hard on annuity sales practices.


Bankwannabe, with a client that old you're opening yourself for all sorts of potential problems if you do anything that exposes her funds to principal risk.  If value is lost her heirs are going to have a field day with you. 


I'd strongly suggest you get her permission to talk with her heirs. Unless you have a relationship with them, when she dies you'll lose control of those assets.  So, try to cement that relationship now so you have some chance of retaining those assets (and also possibly getting more assets from the heirs).  I'd also get her permission to talk with her attorney to make sure her estate plans, durable power of attorney, living will, etc. are being tended to.  You'll be showing that you really care more about her planning needs, and by doing so you may develop a new center of influence with the attorney.  You'll also be further demonstrating to her heirs that you're a competent professional and not just someone trying to sell her something.



Jun 1, 2005 10:39 am

1) Who are her heirs?


2) Does she have any business interests?


3) Does she have a mortgage?


Tell her to buy a house, quick deed it to heir, heir can sell the house. 


I am no tax guru, but look legit to me especially if sitting in cash.

Jun 1, 2005 1:00 pm

Tell her to buy a house, quick deed it to heir, heir can sell the house


Holy Crap!!!  I hope the OP doesn't pay any attention to this advice or the advice about annuities.  Duke has the best general idea for the OP.  Bring in the family and her other financial professionals to review her plans.  Unless you are licensed as an attorney or are a CPA....DO NOT give tax or legal advice. 


BTW: It is a grant deed or quit claim deed.  Don't take the advice of a person who doesn't even know what he is saying.

Jun 1, 2005 4:28 pm

Or you can just ACAT it to Babble Boy...

Jun 1, 2005 10:53 pm

lol


you guys crack me up

Jun 5, 2005 9:26 pm

Thought I'd let you know, Edward Jones pioneered the death benefit on structured notes years ago.  Guess sometimes Jones is the industry leader.

Jun 5, 2005 10:52 pm

Edward Jones invented the Death Put?


In the words of Baby Fat,


"LOL.   You guys crack me up."