Life and Financial Planning
in the Time of COVID-19
by Marc R. Belletsky, JD, CLU, ChFC, RICP
Christina Anstett, JD
Mark A. Teitelbaum, JD, LLM, CLU, ChFC
ABSTRACT
With passage of the Coronavirus Aid, Relief,
and Economic Security Act of 2020 (CARES
Act), and the subsequent Paycheck Protec-
tion Program and Health Care Enhancement
Act, the U.S. government has committed
to transferring nearly $2.7 trillion dollars
to individuals and businesses to weath-
er COVID-19-related issues. Proper advice
and guidance during these turbulent times
can assist clients with their overall financial
plans. This article will offer an overview of
the CARES Act provisions, first covering the
individual provisions and followed by a re-
view of business provisions. It will then offer
planning advice that might be appropriate
for clients, again first from a personal plan-
ning perspective and followed by an assess-
ment from a business owner’s perspective.
Vol. 74, No. 4 | pp. 41-53
This issue of the Journal went to press in June 2020.
Copyright © 2020, Society of Financial Service Professionals.
All rights reserved.
JOURNAL OF FINANCIAL SERVICE PROFESSIONALS | JULY 2020
41
inancial professionals are often placed in
F a difficult predicament when faced with
anxious clients who are struggling through
challenging times. They are trained to say “yes” when
sometimes “no, and here is why” is the better answer.
As is known, some client decisions are made out of
necessity, others out of fear, and still others out of
sheer lack of knowledge and guidance. The financial
professional must walk a tightrope when deciding
when to say “yes” or “no” to a client.
With passage of the Coronavirus Aid, Relief, and
Economic Security Act of 2020 (CARES Act or the
Act), and the subsequent Paycheck Protection Pro-
gram and Health Care Enhancement Act, the U.S.
government has committed to transferring nearly
$2.7 trillion dollars to individuals and businesses to
weather COVID-19-related issues. Proper advice and
guidance during these turbulent times can assist cli-
ents with their overall financial plans. What follows is
an overview of the CARES Act, as well as educational
opportunities and planning ideas for individuals and
business owners alike. Adding life insurance or taking
advantage of existing life insurance cash values can
sometimes make for smoother sailing through the
turbulent waters of retirement income planning.
CARES Act Basics
In response to the current COVID-19 pandem-
ic, the President signed the CARES Act into law on
 Life and Financial Planning in the Time of COVID-19
Marc R. Belletsky et al.
Friday, March 27, 2020. Under the CARES Act,
individuals are expected to benefit by roughly $560
billion; large corporations/employers by $500 billion;
small businesses by $377 billion; state and local gov-
ernments by $339.8 billion; public health by $153.5
billion; and educational/other public institutions by
$43.7 billion—plus, there are safety net provisions of
approximately $26 billion.
With the additional funding of the Paycheck
Protection Program and Health Care Enhancement
Act, another $484 billion designed to increase fund-
ing for the Paycheck Protection Program (PPP) has
been authorized. It is expected to provide a $310 bil-
lion boost, plus a separate Small Business Adminis-
tration (SBA) emergency grant and loan program of
$60 billion, and to direct $75 billion to hospitals and
$25 billion toward new coronavirus testing.
The key components of the CARES Act are de-
scribed below.
Individual Relief and Assistance
Income Tax and Payments Delayed
The deadline for filing of personal income taxes
(1040) and payment of taxes is delayed until July 15, 2020.
Subsequent guidance by the IRS under Revenue Notice
2020-23 delayed the deadline for filing all other returns
(Corporate Form 1120, S Corporation Form 1120S, and
Partnership Form 1065) and associated payments.
Cash Payments
Most single individuals earning less than $75,000
are eligible to receive a one-time $1,200 payment that
was sent out beginning in the second week of April.
Married couples qualify to receive $500 per eligible
dependent child. An average family of four, earning
less than $150,000, might receive up to $3,400. The
benefits are fully phased out for individuals making
greater than $99,000; married couples making more
than $198,000; or a head of household earning great-
er than $136,000. Payments will be based on the last
filed income tax return. Generally, if a 2019 return
has not been filed, the IRS will determine eligibility
JOURNAL OF FINANCIAL SERVICE PROFESSIONALS | JULY 2020
42
based on the 2018 return.
The phaseout is $5 for every additional $100
above the phaseout threshold:
• Single Earner: Phase out begins above $75,000
through $99,000
• Married Couple: Phase out begins above
$150,000 through $198,000
• Head of Household: Phase out begins above
$112,500 through $136,000
It is important to remember that the payments
clients receive, while not income taxable, are advanc-
es of anticipated refunds or refunds of taxes paid into
the system. The cash stimulus payments are techni-
cally an advance tax credit meant to offset taxes on
an individual’s 2020 return. As a result, for 2020, it
is possible that client’s taxes will be under-withheld if
an individual’s taxable income in 2020 is going to be
higher than the year used to determine the cash pay-
ment. If a client’s income is higher in 2020 so as to
render the client ineligible for all or part of the CARES
Act credit, or they are otherwise under-withheld, taxes
may be due on these advances. Advisors should remind
taxpayers to check their W-2s for withholding, and to
adjust withholding or make estimated tax payments
for 2020, if necessary. This is also an excellent time to
review coverage and possibly the IRS Form 1040.
Extra Unemployment Benefits
State-run unemployment programs will continue
to pay benefits, but eligibility is expanded, and ben-
efits have been broadened. The Act adds $600 per
week from the federal government on top of whatever
the recipient is currently receiving in state benefits to
help bolster consumer spending among the ranks of
the suddenly unemployed. This amount will contin-
ue through July 31, 2020. If a person is currently un-
employed and is receiving $300 per week, that person
will receive $900 per week through July 31.
The total number of regular payments under
state unemployment has been increased by 13 weeks.
If a person receiving unemployment had 20 weeks of
benefits, they will now have 33 weeks. Extensions are
 Life and Financial Planning in the Time of COVID-19
Marc R. Belletsky et al.
available for the longer period. Self-employed people
are eligible for unemployment benefits if they were in
business prior to February 15, 2020. Unemployment
benefits are taxable income and many states either
may not withhold adequately or they may allow indi-
viduals to opt out of withholding.
Pandemic Unemployment Assistance Act
A similar program for temporary, or so-called
gig workers, was also created. The Pandemic Unem-
ployment Assistance Program (PUA) will assist those
who lost contracts due to the crisis. Clients eligible
for PUA include those who were self-employed, did
not have a sufficient work history to qualify for reg-
ular unemployment compensation, or who have ex-
hausted their rights to regular or extended benefits.
PUA provides up to 39 weeks of benefits to covered
individuals who are not eligible for regular unem-
ployment compensation and who are otherwise able
and available to work, except that they became un-
employed or partially employed because of any one
of the following COVID-19-related reasons:
• diagnosed with or are experiencing symptoms of
COVID-19 and are seeking a medical diagnosis
• a member of their household has been diagnosed
with COVID-19
• providing care for a family member or a member
of the household who has been diagnosed with
COVID-19
• a child or other person in the household for whom
the individual is the primary caregiver is unable to
attend school or another facility that is closed due
to the COVID-19 pandemic, and that school or
facility care is required for the individual to work
• unable to reach place of employment because of
a quarantine or stay-at-home order due to the
COVID-19 pandemic
• unable to reach place of employment because
they have been advised by a health care provider
to self-isolate or quarantine because they are pos-
itive for, or may have had exposure to, someone
who has or is suspected of having COVID-19
JOURNAL OF FINANCIAL SERVICE PROFESSIONALS | JULY 2020
43
• scheduled to start a new job and do not have an
existing job or are unable to reach the job as a
direct result of the COVID-19 pandemic
• have become the breadwinner/major supporter
for a household because the head of household
has died as a direct result of COVID-19
• had to quit job due to being diagnosed with
COVID-19 and being unable to perform work duties
• place of employment is closed as a direct result of
the COVID-19 pandemic
Retirement Plans—
Funding Relief for Employers and
Expanded Access for Individuals
Funding Relief for Employers
The CARES Act temporarily relaxes employer
retirement plan funding requirements.
• First, the funding grace period for deductible
contributions to defined-contribution (DC)
plans otherwise due between April 1 and July 15
has been extended until July 15, 2020.
• In addition, defined-benefit (DB) plan required
contributions for 2020 have been delayed until
January 1, 2021. This means that businesses that
have DB plans will not have to meet minimum
funding requirements for 2020. Moreover, DB
plans may use 2019 funded percentages to deter-
mine whether benefit restrictions are necessary.
o A consequence of this relief is that life insurance
contracts within those plans may or may not
have the necessary premium amounts. While
many companies are utilizing these extended
contribution due dates, existing qualified plans
with life insurance need to be reviewed to see if
additional premiums are needed and what effect
a nonpayment might have. While true of DB
plans, it is equally true for DC plans where life
insurance is provided as an “incidental benefit.”
Coronavirus-Related Distributions (CRDs)
The Act allows qualified individuals to with-
draw up to $100,000 from their qualified DC plan
 Life and Financial Planning in the Time of COVID-19
Marc R. Belletsky et al.
or IRA before age 59½ without the 10 percent early
withdrawal penalty or the mandatory 20 percent fed-
eral tax withholding.1 CRDs are permitted without
regard to the typical restrictions on in-service with-
drawals in DC plans. Federal taxation on a CRD can
be spread ratably over 3 years and the CRD may be
recontributed within the same 3-year timeframe to
an eligible retirement plan or arrangement. Normal
state taxation and withholding will apply, as appli-
cable. A participant’s total withdrawal across all DC
plans and IRAs may not exceed a total of $100,000.
CRDs are available through December 30, 2020.
Participant Loans
The CARES Act also permits a plan to tempo-
rarily increase the limit on plan loans to qualified
individuals from the lesser of 50 percent of the par-
ticipant’s vested account balance, or $50,000, to the
lesser of 100 percent of the participant’s vested ac-
count balance, or $100,000. This increase is permit-
ted for loans granted during the 180-day period after
the date of enactment of the Act, i.e., until September
22, 2020. The limit on 401(k) loans was raised from
$50,000 to $100,000, which is double the current
limit. Participant loans must normally be repaid over
a maximum of 5 years. However, under the Act, prin-
cipal and interest payments are suspended for one
year for loans granted through December 31, 2020.
At the end of the suspension period, loans must be
reamortized to include accumulated interest during
the suspension period. Additionally, the length of the
suspension period is added to the remaining term of
the loan, essentially disregarding the suspension peri-
od and maintaining the 5-year repayment term.
Required Minimum Distributions
Required minimum distributions (RMDs) that
would otherwise be required from DC plans or IRAs
are suspended for 2020. These amounts can therefore
continue to accumulate tax free under the applicable
plan or account. This also means that future RMD
amounts will likely be different than anticipated.
JOURNAL OF FINANCIAL SERVICE PROFESSIONALS | JULY 2020
44
This RMD waiver applies to DC plans, including:
1. qualified 401(a) plans, such as profit sharing and
money-purchase pension plans
2. 401(k) plans
3. 403(a) and 403(b) plans
4. governmental 457(b) plans
5. individual retirement accounts (IRAs)
If all or any part of an RMD has already been
made in 2020 that would have qualified for the waiv-
er, and it is still within the 60-day time period from
the date of the RMD, that payment can be rolled
back into a qualified plan or IRA to avoid taxation in
2020. IRS relief is anticipated for those individuals
who may be beyond the 60-day time period. Not-
withstanding the 2020 RMD waiver, most plans will
likely provide participants with the opportunity to
receive distribution of the equivalent RMD amount
should it be necessary to meet current expenses.
Student Loan Relief
Effective April 10, 2020, for federal student loans
owned by the U.S. Department of Education (includ-
ing Federal Family Education Loans (FFEL), Federal
Direct Loans, and Federal Perkins Loans), payments
and interest accrual through September 30, 2020, are
automatically suspended. During the suspension peri-
od, borrowers are protected from any involuntary col-
lections, wage garnishment, reduction of tax refunds
or federal benefit payments, and interest penalties. Bor-
rowers may request a refund of payments made since
March 13, 2020. Additionally, the payment-waiver
period will be credited toward federal forgiveness and
cancellation programs (e.g., Teacher Loan Forgiveness,
TEACH Grants, and Public Service Loan Forgiveness).
The CARES Act also modified Internal Revenue
Code Section 127 to allow employers who provide
tuition reimbursement programs to include student
loan payments up to a maximum of $5,250 income
tax free to the employee until January 1, 2021.
Small-business owner clients may choose to go this
route, in lieu of compensation, if they employ people
who are studying for degrees.
 Life and Financial Planning in the Time of COVID-19
Marc R. Belletsky et al.
Charitable Giving Opportunity
As many clients during turbulent times like
to give back, the following CARES Act provisions
should be brought to their attention. The Act pro-
vides a $300 qualified cash charitable deduction for
nonitemizers. Qualified contributions must be made
to IRC Section 501(c)(3) charities. This deduction
can be taken on 2020 taxes filed in 2021. Therefore,
a couple that files jointly can take a $600 deduction
even if they do not itemize.
Additionally, the Tax Cuts and Jobs Act of 2017
(TCJA) limitation of 60 percent for cash contribu-
tions has been increased to 100 percent for 2020.
Contributions to donor-advised funds (DAFs) or
private foundations are not eligible. Qualified char-
itable deductions of up to $100,000 are allowed for
persons over the age of 70½. Both itemizers and
nonitemizers therefore have additional capacity for
charitable gifts in 2020.
Corporations can contribute up to 25 percent of
taxable income to IRC Section 501(c)(3) charities.
This is up from 10 percent in 2019. So, clients should
be encouraged to seek employer matching grants if
those programs are available.
Relief for Small-Business Owners
Small-Business Relief for Employee Retention
Approximately $350 billion of the CARES Act was
dedicated to preventing layoffs and business closures
while workers must stay home during the outbreak.
Later in April, subsequent relief known as the Paycheck
Protection Program and Health Care Enhancement Act
was passed by Congress and signed into law. It commit-
ted an additional $310 billion of funds to this pool.
A range of programs are offered and detailed
below. The one that has received the most press is
the Paycheck Protection Program or PPP. Companies
with 500 employees or fewer that maintain their pay-
roll during coronavirus could receive up to 8 weeks of
cash-flow assistance via a forgivable interest-free note.
However, there are other programs and each is sum-
marized below.
JOURNAL OF FINANCIAL SERVICE PROFESSIONALS | JULY 2020
45
What Is the Paycheck Protection Program?
The PPP provides cash-flow assistance through
federally guaranteed loans as an incentive to em-
ployers who maintain their payroll during this
emergency. Up to 2.5 times an employer’s eligible
payroll was allowed as a loan to assist toward payroll
continuation. In addition to payroll (75 percent),
the PPP money is permitted to be used for insur-
ance premiums, retirement plan contributions, rent,
mortgage interest, and utilities. If employers main-
tain their payroll, the loan principal will be forgiv-
en. The loan forgiveness is calculated by using the
following formula:
Forgivable portion (FP) = Payroll costs (PC)
(both cash and certain noncash)/52 + any ap-
plicable mortgage interest payments (MIP) +
any covered utility payment (UP) × 8 weeks,
or:
FP = PC / 52 + (MIP + UP × 8)
However, it is important to note that the payroll
costs are over an average 52 weeks while utilities and
mortgage interest are based on the 8 weeks after the
loan had been granted. It is important for advisors
to stay on top of any developments. It took just 13
days for the first PPP program to run out of funds,
so a second round was authorized which will also be
tapped quickly.
Delayed Payment of Employer Payroll Taxes
This allows taxpayers to defer paying the em-
ployer portion of certain payroll taxes through the
end of 2020, with all 2020 deferred amounts due in
two equal installments—one at the end of 2021 and
the other at the end of 2022.
If small-business owners avail themselves of the
payroll tax delay, they foreclose themselves to the PPP.
They remain eligible for:
• Economic Injury Disaster Loans (EIDL) and
Loan Advance
• SBA Express Bridge loans
• SBA Debt Relief
 Life and Financial Planning in the Time of COVID-19
Marc R. Belletsky et al.
What Are Economic Injury Disaster Loans
and Emergency Injury Grants?
An emergency advance of up to $10,000 to
small businesses and private nonprofits harmed by
COVID-19 is available within 3 days of applying
for an SBA EIDL. Grants and loans may be used to
keep employees on payroll; pay for sick leave; meet in-
creased production costs due to supply chain disrup-
tions; or pay business obligations, including debts,
rent, and mortgage payments.
What Does the SBA Bridge Loan Program
Allow for Small Businesses?
The SBA Bridge Loan Program allows small busi-
nesses who currently have a business relationship with
an SBA Express Lender to access up to $25,000 with
less paperwork. These loans can provide vital eco-
nomic support to small businesses to help overcome
the temporary loss of revenue they are experiencing.
The loans can be used to bridge the gap while apply-
ing for a direct SBA Economic Injury Disaster Loan.
Can the Small Business Debt Relief Program
Help with Previously Secured SBA Loans?
The Small Business Debt Relief Program pro-
vides immediate relief to small businesses with nondi-
saster SBA loans, in particular Sections 7(a), 504, and
microloans. Under this program, the SBA will cover
all loan payments on previously secured SBA loans,
including principal, interest, and fees, for 6 months.
What Other Provisions Are Available to Help
Small-Business Owners?
The Employee Retention Credit for Employers
Subject to Closure or Experiencing Economic Hard-
ship is a refundable payroll tax credit for 50 percent
of wages paid by eligible employers to certain em-
ployees during the COVID-19 crisis.
Planning Considerations for Individuals
It is important for financial professionals to take
the lead and educate clients about potential sources of
JOURNAL OF FINANCIAL SERVICE PROFESSIONALS | JULY 2020
46
economic relief as they make critical decisions during
these extraordinary circumstances that will im-
pact their retirement futures. The following should
be considered a general discussion of overall plan-
ning considerations resulting from provisions in the
CARES Act. The actual planning for clients would
be highly customized based on their own facts and
circumstances. It is also important to highlight other
tax, legacy, and business planning opportunities.
Planning for individual clients cannot be gener-
alized or routinized. Each individual client will have
different needs and time horizons. However, the time
horizons for client retirement needs can be segregated
and viewed independently. For example:
• Younger clients who are in an accumulation mode
may have the longest time horizon. They should
be encouraged to continue saving and take ad-
vantage of current market volatility. Because of
their longer time horizon, they have an opportu-
nity to accumulate now, at potentially lower val-
uations. Concepts such as dollar-cost averaging
(DCA) might work very well for them, as well as
a continued systematic investment plan.
• On the opposite end of the planning spectrum,
older clients that are in a wealth preservation
mode, at or nearer to retirement, will be very
concerned with their shorter time horizons for
economic recovery. For them, there is the realiza-
tion that market volatility is a new normal they’ll
need to deal with throughout their retirement.
Here, emphasizing preservation of principal and
minimizing sequence of returns risk might be
more appropriate.
• In the middle, some clients may be unaffected by
this crisis or may have significant remaining net
worth, presenting different planning opportuni-
ties with depressed asset values. Here, the advi-
sor may want to talk about repositioning assets,
possibly into a different tax structure, to benefit
from the recovery.
Financial professionals may want to use a differ-
ent focus for each of these clients, also based on their
 Life and Financial Planning in the Time of COVID-19
Marc R. Belletsky et al.

individual needs and reaction to the recent market
volatility. Each of the items below is intended to fo-
cus on some of the common planning questions that
may come up, due both to the CARES Act and re-
cent economic trends.
The Cost of Retirement Plan
Withdrawals and Loans
One common question will be whether clients
should take advantage of the cash withdrawal or loan
provisions offered by the CARES Act. The following
is an analysis of the efficacy of withdrawals and loans
from retirement savings plans. When working with
a client who is thinking of accessing funds from a
retirement plan, two critical questions which need to
be addressed are:
1. What is the market opportunity lost by a client
who takes a withdrawal or loan?
2. How much will it cost that client to have money
taken out of the plan?
The following scenario can be considered. If a
client withdrew or borrowed $100,000 today, from
a $1 million 401(k) plan account, how much would
that account have been worth for retirement in 5
years? In 10 years? In 15 years? What effect would
such a move have on a client’s ultimate 401(k) ac-
count and their funds available for retirement?
Sometimes a picture is worth a thousand words.
Figures 1-3 demonstrate the potential results of with-
drawals and/or loans being taken from retirement
plans. These results are estimates and individuals will
experience differing results based on their actual sit-
uations. No specific conclusions can be drawn from
these examples. Using the assumption of a 50-year-old
client and a hypothetical 7 percent rate of return, in
15 years, the potential plan account value without the
withdrawal would be approximately $2,759,032. That
would produce roughly an income stream of $137,952
per year for 20 years (assuming no additional growth).
What is the effect of a $100,000 withdrawal,
assuming the same 7 percent rate of return? The
CARES Act allows this size withdrawal and allows
the tax to be spread ratably over the next 3 years.
In a 37 percent tax bracket, that would be roughly
$12,333.33 per year for a total tax of $37,000. In the
end, that nets an individual $67,000 although they
will have been able to spread the tax bill. The po-
tential gain would be approximately $2,483,128 for a
total projected income stream of $124,156. In short,
$275,904 is lost that translates to a reduced $13,796

FIGURE 1
Effect of a $100,000 Withdrawal, 7 Percent Growth, No Repayment

$3,000,000 $2,759,032
$2,483,128
$2,500,000

$2,000,000
Taking $100,000 withdrawal
with no repayment has a Almost $14,000 per
$1,500,000 cost of $275,904 year for 20 years

$1,000,000

$500,000 $275,904 $137,952 $124,156 $13,796

None @7% With $100,000 Difference 65-85 65-85 Difference

JOURNAL OF FINANCIAL SERVICE PROFESSIONALS | JULY 2020

47
 Life and Financial Planning in the Time of COVID-19
Marc R. Belletsky et al.

per distribution for 20 years (Figure 1). making contributions is helpful.

For people wondering if they should continue to
make contributions to the plan, Figure 2 demonstrates
a similar result. The contribution amount was increased
annually at $500 per year and a 4 percent company
match was assumed on the entire contribution amount.
This is typical of a standard 401(k) plan. Once again,
assuming a 50-year-old client and a 7 percent hypothet-
ical rate of return, in 15 years, the potential plan account
value without the withdrawal and assuming regular
401(k) contributions (increasing at $500 per year plus
a 4 percent employer match on the contribution) would
be approximately $3,384,833. That would produce an
income stream of roughly $169,242 per year for 20 years
(assuming no growth once retirement begins).
Now, that same 7 percent rate of return is as-
sumed, but with a $100,000 withdrawal taken this
year. The CARES Act allows this and allows the
tax to be spread ratably over the next 3 years. In a
37 percent tax bracket, that would again be roughly
$12,333.33 per year. The potential gain would be ap-
proximately $3,126,979 for a total projected income
stream of $156,349. In short, $257,854 is lost, and
that translates to a reduced $12,893 per distribution
for 20 years. This shows that staying the course and
Finally, by way of example, if the client took a
loan from the plan, the results are more positive as
funds are being restored to the plan, interest is be-
ing paid to the plan, and the client is not required to
pay taxes unless they fail to repay the loan. However,
the client would have to repay the loan from outside
sources with after-tax dollars.
Considering the same 50-year-old and the same
7 percent rate of return, in 15 years, the potential plan
value without the loan and assuming regular 401(k)
contributions, which increases at $500 per year plus
a 4 percent employer match would be approximately
$3,384,833. That would, again, produce an income
stream of roughly $169,242 per year for 20 years (as-
suming no growth starting at retirement).
Now, that same 7 percent rate of return is again
assumed, but a $100,000 loan is taken this year. The
CARES Act allows this size withdrawal or loan and
allows the loan to delay repayment and accumulate
interest for one year, with repayment in 5 years. The
potential gain would be approximately $3,305,921 for
a total projected income stream of $165,296. The in-
terest rate is projected to be current U.S. prime rate +
2 (3.25% +2% =5.25%). Accrued interest over the loan

FIGURE 2
Effect of a $100,000 Withdrawal, No Repayment, with Ongoing Contributions and Match

$3,500,000 $3,384,833
$3,126,979
$3,000,000 Taking $100,000 withdrawal with
no repayment, contributions
$2,500,000 increase at $500 per year, with
employer match of 4% of
$2,000,000 contribution amount results in Around $13,000 per
$257,854 less. year for 20 years
$1,500,000

$1,000,000

$500,000 $257,854 $169,242 $156,349 $12,893

None @7% With $100,000 Difference 65-85 65-85 Difference

JOURNAL OF FINANCIAL SERVICE PROFESSIONALS | JULY 2020

48
 Life and Financial Planning in the Time of COVID-19
Marc R. Belletsky et al.

term (including the suspension period) is estimated to
be $16,301. A full loan repayment plus interest ratably
by year 6 is illustrated. In short, $84,435 is lost; that
translates to a reduced $3,946 per distribution for 20
years (Figure 3). The power of continuing to make
contributions to plans shows that retirement income
is about staying the course; paying back the loan gen-
erally comes closest to squaring up the plan.
Roth Conversions and
Asset Repositioning
Because many financial professionals like to po-
sition a tax-free bucket in a client’s portfolio, consid-
eration of a Roth IRA conversion, while assets are
depressed and tax rates are somewhat low, might be a
good way to start a client discussion. It’s a great idea
for the right client, but it needs to be looked at within
the perspective of the client’s larger picture. However,
if a client does a Roth IRA conversion, like the with-
drawal from a qualified plan seen earlier
• it accelerates taxes (and care needs to be taken not
to bump a client into a higher tax bracket), and
• if there’s a family life insurance need, it doesn’t
address that need
This can be taken one step further. What if the
client were to also look at moving existing brokerage
assets into an asset that acts as a “tax-wrapper” sim-
ilar to a Roth IRA? Even though a client might be
facing losses, where a client has a life insurance need,
it may be better to recover the gains inside a life in-
surance accumulation product.
As diversifying across different asset classes and
asset types is considered, it’s important to note that
clients need safety net sources of income. Clients
never know how assets (retirement or otherwise) will
perform in any given year. It’s one thing to have fluc-
tuations during a client’s accumulation years because
when they retire, they’ll have reached a target goal with
their assets. But what happens to those assets in retire-
ment can be critical. Losses early in retirement can risk
depleting one’s retirement assets faster than growth in
the early years followed by losses in later years; it is
impossible to know what a client will be retiring into.
This is the classic “sequence of returns risk.” Selective
withdrawals of life insurance cash values at times of
market drops can cushion a client against those in-
evitable downturns. What is being suggested is using
life insurance cash values as a safety net, an alternative
asset, to smooth out the waves a client might see in
their traditional retirement assets. This is not unlike

FIGURE 3
Loan from Plan with Payback

$3,500,000 $3,384,883 $3,305,921

$3,000,000

$2,500,000
Taking $100,000 Loan at
$2,000,000
5.25%, paying back loan Around $4,000
per CARES Act Per year for 20 years
$1,500,000

$1,000,000

$500,000
$84,435 $169,242 $165,296 $3,946

None @7% LOAN of Difference 65-85 65-85 Difference

$100,000

JOURNAL OF FINANCIAL SERVICE PROFESSIONALS | JULY 2020

49
 Life and Financial Planning in the Time of COVID-19
Marc R. Belletsky et al.
the CARES Act provision that suspends RMDs, so as
to allow IRA assets a chance to recover.2
Using selective withdrawals and loans of policy
cash values as a tax-advantaged source of funds in the
kind of environment being experienced allows a cli-
ent’s other assets to recover so that the clients are not
forced to sell into, and lock in, a loss. It can make the
difference from having a client conversation about an
eroding pool of retirement assets to a conversation
about wealth transfer to the next generation.
It is important to remember that loans and with-
drawals reduce the policy’s cash value and death
benefit, may cause certain policy benefits or riders to
become unavailable, and increase the chance the pol-
icy may lapse. If the policy lapses, is surrendered, or
becomes a modified endowment contract (MEC), the
loan balance at such time would generally be viewed
as distributed and taxable under the general rules for
distribution of policy cash values.
Under current federal tax rules, clients general-
ly may take federal income-tax-free withdrawals up
to their basis (total premiums paid) in the policy
or loans from a life insurance policy that is not an
MEC. Certain exceptions may apply for partial with-
drawals during the policy’s first 15 years. If the policy
is an MEC, all distributions (withdrawals or loans)
are taxed as ordinary income to the extent of gain in
the policy and may also be subject to an additional 10
percent premature distribution penalty prior to age
59½, unless certain exceptions are applicable.
Clients considering repositioning assets need to be
reminded of the power and flexibility of cash value life
insurance. Right now, many clients and small-business
owners are considering borrowing or not funding their
qualified plans. They should also be considering pur-
chasing more coverage for family or business protec-
tion and utilizing existing cash value life insurance. If
a client is weathering this crisis and realizes they need
$100,000, the options are there. Should they access
or deplete their IRA or qualified plan? If the client
does need the $100,000, they would have to pay up to
$37,000 in federal income tax. Whether that is spread
JOURNAL OF FINANCIAL SERVICE PROFESSIONALS | JULY 2020
50
over 3 years or not, it is an additional cost. Some cli-
ents might also have state income taxes. The loan and
repayment would cost nearly that amount. If they had
the option of accessing cash value life insurance via a
loan, it might offer a different set of choices.
Finally, for the older baby boomer looking to
transfer wealth to their children or grandchildren and
concerned as to what might happen if there’s another
market drop—as in 2000, 2008, and 2020—life in-
surance can help stabilize wealth transfer. Using the
concept of life insurance as an asset, it may be possi-
ble for the client to take small portions or percentages
of their portfolio, or a portion of annual growth, and
purchase a life insurance policy to ultimately protect
the overall financial and legacy planning.
Here, the death benefit of the policy can replace
value that was lost to market volatility. This can assure
a client some peace of mind that they’ll be able to pass
death benefit amounts to their family regardless of
what the market forces are doing to their other assets
when they pass. Financial professionals can structure
this in a way that doesn’t disrupt assets under manage-
ment, perhaps by harvesting a small portion of assets
a year or through some growth. Now that asset values
are depressed, a client might be looking to regroup, but
if they can focus on a reasonable percentage (often low
single digits), the effect on their portfolio won’t be that
noticeable as asset values recover. This technique also
has the effect of allowing financial professionals more
flexibility with their client planning. For one client,
they might be able to go in a more aggressive direction
knowing the client has an anchor with the life insur-
ance death benefit. For other clients, they might carve
out some assets for a series of annuities for income,
knowing other assets will transfer wealth to the family.
Pure Family Protection and Policy Review
Life insurance reviews and whether a client’s cur-
rent insurance is appropriate or adequate for the client’s
needs is a conversation that any financial professional
should bring to the table during these troubling times.
In general, adding life insurance or taking ad-
 Life and Financial Planning in the Time of COVID-19
Marc R. Belletsky et al.
vantage of existing life insurance cash values can
sometimes allow smooth sailing through the turbu-
lent waters of retirement income planning.
Wealth Transfer Planning Techniques
A thorough analysis of wealth transfer techniques in
today’s environment merits a full article and transcends
the CARES Act, but this article wouldn’t be complete
without a brief discussion noting how this is an import-
ant consideration with clients, regardless of the asset size.
For high-net-worth clients, there currently ex-
ists the highest estate and gift exemption ever at
$11,580,000 per person, or $23,160,000 for a mar-
ried couple. Those amounts will be more than halved
after 2025 when the TCJA provisions in this area are
due to sunset. It remains important to take advantage
of this high exemption, particularly as the Treasury
has noted there will not be a claw-back for gifts made
now even if future exemption amounts are lower.
Additionally, now may be a particularly opportune
time to discuss and explore wealth transfer transactions
that can take advantage of today’s ultra-low-interest
rates. This can be a valuable discussion for clients re-
gardless of their net worth, but for high-net-worth cli-
ents, the low interest rate can be combined with the very
high exemption for what may be once in a lifetime plan-
ning. These discussions include grantor retained annu-
ity trusts (GRATs), loans to trusts or private financing
split dollar, and sales of businesses to irrevocable grantor
trusts as a means to transfer businesses and investments
generationally. GRATs are a particularly attractive
transaction as income from assets given away today will
reflect a very low interest rate, yet the retained amount
can be increased up to 20 percent annually.
Loans may also be a very popular approach in
the next few years given the low-interest-rate envi-
ronment. A simple example can be a business owner
lending money to a key employee for 9 years. The
interest rate that would need to be charged under the
current applicable federal rates (AFRs) is less than one
percent. Similarly, a client could contemplate lending
assets to a trust. The growth and income generated
JOURNAL OF FINANCIAL SERVICE PROFESSIONALS | JULY 2020
51
by those assets could both pay a low-interest loan and
excess growth and income can be used to leverage
into premium payments with life insurance.
So, as people begin to feel comfortable with the
“new reality,” the low-interest-rate environment gives
them a chance to really help solve their retirement in-
come needs as well. Imagine a person selling a depressed
stock portfolio to an irrevocable trust, and the assets are
removed from the estate. When the stock appreciates in
value, the appreciation is removed from the estate, but
a string known as a promissory note is retained back by
the seller of the property. A promissory note is nego-
tiable, so while it may start at a low-interest rate of less
than one percent, it can be increased when additional
income is needed. This sort of planning flexibility is en-
hanced by cash value life insurance, these transactions
can be used to purchase policies, and those policies can
be utilized in all of the ways discussed.
Planning Considerations for
Business Owners
Net-Operating Losses
The recent TCJA net-operating-loss (NOL) rules
are modified. The 80 percent rule is removed, and
losses can now be carried back 5 years. There is also a
20-year carryforward of NOLs incurred before Janu-
ary 1, 2019, plus the lesser of: (1) all NOLs after De-
cember 31, 2017, or (2) 80 percent of taxable income
payroll costs, interest on mortgage obligations, rent,
and utilities would be forgiven.
Excess-Loss Limitations
The excess-loss limitation (ELL) rules for pass-
through entities are suspended for excess losses in-
curred in 2018, 2019, and 2020. This will assist
businesses with cash flow as the limitations lead to
more included income.
Interest-Expense Limitation
Similar to the excess-loss-limitation rules, the in-
terest-expense limitations are temporarily increased
to 50 percent from 30 percent for tax years beginning
 Life and Financial Planning in the Time of COVID-19
Marc R. Belletsky et al.
in 2019 or 2020. Taxpayers can also elect to calcu-
late the interest limitation for 2020 using their 2019
adjusted taxable income as the relevant base, which
often will be significantly higher.
Buy-Sell Planning in Crisis
On top of the income tax ramifications of the
CARES Act, many business owner clients have buy-
sell agreements in place. A buy-sell agreement can
effectively transfer a business to family members
in the event of a business owner’s death. If a buy-
sell agreement is incorrectly drafted, it may lead to
family and business strife, litigation, and unintend-
ed financial consequences, including the failure of
the business. Small-business owners who take on
debt during the COVID-19 crisis could unwitting-
ly affect their existing buy-sell agreements. Further,
clients who have no buy-sell agreements may be
transferring debt to other owners and family mem-
bers. Now is the time for insurance professionals to
review this area with clients.
Here’s a quick list of the most important things
to visit with business-owner clients when performing
a buy-sell review:
1. Is there a buy-sell agreement in place?
2. Does the buy-sell agreement address the correct
parties?
3. Is the buy-sell agreement reflective of the current
market conditions?
4. Is the business worth what it was when the buy-
sell agreement was drafted?
5. Is there a formula clause for the business valua-
tion in the buy-sell agreement?
6. Is the buy-sell agreement adequately funded with
life insurance?
7. Does the structure of the insurance funding
match the buy-sell obligations?
8. Is the structure of the buy-sell agreement opti-
mized for tax and practical objectives?
9. Are all the relevant buyout triggers included in
the agreement?
10. Are there any special family issues that have not
JOURNAL OF FINANCIAL SERVICE PROFESSIONALS | JULY 2020
52
been adequately addressed and may be better
handled by a will or trust?
11. Are wills and trusts considered in the buy-sell
agreement?
So, when dealing with business-owner clients,
one size does not fit all in times of crisis.
Wills and Trust Planning for
Small-Business Owners
Not every business-continuation plan involves the
use of a buy-sell agreement. In some cases, especially
family situations, the older generation might simply in-
tend to pass the business ownership to one or more adult
children through a will or trust. Sometimes the children
are of age; other times, they might be minor children.
In these cases, the advisor should help the cli-
ent make sure that those testamentary transfer plans
are properly documented by the client’s will or trust.
These items will become more and more important
in times of crisis. Further, the crisis may reveal cracks
in the plan. An advisor can assist in designing the
perfect plan on paper, but business-continuation
plans often times fail because of the person(s) chosen.
So, the advisor needs to discover:
• Are successor owners prepared with the right
skills to take over?
• Are they ready to handle crisis?
• Do key employees know about the succession
plans that the owners have put in place?
• Have any difficult family or office dynamics
been properly planned for?
While engaging in a review of a client’s busi-
ness-continuation plan may be difficult to do well,
the conversation is one that can produce significant
results for clients during these difficult times.
Conclusion
In this time of economic and social crisis, life in-
surance and financial planning advice is more valuable
than ever. The tough economic news of the past few
months affects clients in many ways. Review of life in-
surance needs and planning strategies, retirement sav-
 Life and Financial Planning in the Time of COVID-19
Marc R. Belletsky et al.
ings, asset allocation, tax efficiency, and general wealth
planning have never been more important. Now is a
good time to consider proactively reaching out to cli-
ents and informing them of the potential ramifications
of the current economic upheaval. Social distancing
should not keep us from what financial professionals do
best—advising clients on the impact of laws such as the
CARES Act. Financial professionals have an obligation
to engage in the review activities described and a duty
to provide what is in the clients’ best interest. n
Variable products are co-distributed by AXA Ad-
visors, LLC (Member FINRA, SIPC) and AXA Dis-
tributors, LLC. When sold by New York based (i.e.,
domiciled) financial professionals life insurance is is­sued
by AXA Equitable Life Insurance Company.
Equitable is the brand name of Equitable Hold­
ings, Inc. and its family of companies, including AXA
Equitable Life Insurance Company (NY, NY) (AXA
Equitable) MONY Life Insurance Company of America
(Arizona stock corporation, main administrative office
Jersey City, NJ); AXA Advisors, LLC (member FINRA,
SIPC); and AXA Distributors, LLC. The obligations of
AXA Equitable and MONY Life Insurance Company of
America are backed solely by their claims paying ability.
Marc R. Belletsky, JD, CLU, ChFC, RICP, is assistant vice pres-
ident, Advanced Markets, at Equitable Life Insurance Compa-
ny. Marc is an advanced sales consultant who has worked at
several insurance carriers and has been assisting agents for
over 35 years in the areas of estate and business planning,
nonqualified-deferred compensation, foreign nationals, cor-
porate and bank-owned life insurance (COLI/BOLI), and pri-
vate-placement insurance. He is a former bank trust officer
and was the president of a broker dealer that specialized in
nonqualified-deferred compensation and COLI/BOLI/private
placement insurance. A noted author and speaker, he has
spoken at numerous professional meetings and has been
quoted by many major news outlets. An adjunct professor of
law at Western New England University School of Law LLM
program in Springfield, Massachusetts, he is also a member
of the Connecticut bar and holder of FINRA Series 6, 63, and
26 licenses. His JD is from the New England School of Law
and he is an honors graduate from the University of Connecti-
cut. He can be reached at marc.belletsky@equitable.com.
JOURNAL OF FINANCIAL SERVICE PROFESSIONALS | JULY 2020
53
Christina Anstett, JD, is an ERISA attorney with over 25
years of retirement plan industry experience specializing in
the design, implementation, and ongoing administration of
employee retirement programs. Prior to joining Equitable in
2013, she was senior vice president and chief legal officer for
a national retirement plan consulting firm. Tinas is a frequent
speaker at industry conferences and a presenter of seminars,
webinars, and training programs. She holds a BA from New
York University, a JD from Western New England University
School of Law and is a member of the Connecticut bar. Tina
is also a member of the American Society of Pension Profes-
sionals and Actuaries, the National Association of Plan Ad-
visors, and the National Tax-Deferred Savings Association.
She holds FINRA Series 6 and 63 licenses and a variable an-
nuity, life, and variable life producer license. Christina can be
reached at Christina.Anstett@equitable.com.
Mark A. Teitelbaum, JD, LLM, CLU, ChFC, is vice president,
Advanced Markets, at Equitable Life Insurance Company.
Mark joined Equitable in June 2006 to manage Advanced
Markets. He is currently head of Life Advanced Markets Strat-
egy & Governance. Prior to joining Equitable, Mark worked at
several other life insurance carriers. He has also performed
tax and business planning work for a Boston area firm that
specialized in executive stock option planning and a CPA firm
that specialized in estate planning for business owners. Mark
is an assistant editor of the Journal of Financial Service Profes-
sionals and was previously the editor of the Society of Finan-
cial Service Professionals’ Business & Compensation Plan-
ning Section newsletter. Mark actively participates with the
Association for Advanced Life Underwriting (AALU). He has
published articles in several professional journals. Mark is a
graduate of Kenyon College and obtained his law degree and
LLM at both Ohio Northern University and Boston University.
He can be reached at Mark.Teitelbaum@equitable.com.
(1) For CRD and participant loan purposes, the Act defines a quali-
fied individual as an individual who has been diagnosed, or individual
with a spouse or dependent who has been diagnosed, with COVID-19
by a test approved by the Centers for Disease Control and Prevention;
or an individual who experiences adverse financial consequences as a
result of being quarantined, being furloughed, or laid off, or having
work hours reduced due to COVID-19; being unable to work due to
lack of child care due to COVID-19; closing or reducing hours of a
business owned or operated by the individual due to COVID-19; or
other factors as determined by the secretary of the Treasury.
(2) This recognizes that in normal years RMDs do need to be taken
and that the contingency assets, discussed here, are not a source of
funds to access in lieu of RMDs during normal distribution years.
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