MetLife Interview Q&A Outline

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1. what is estate planning？

Estate Planning means different things to different people.

Sometimes Estate Planning is as simple as having a Will drafted.

But for most people, Estate Planning involves much more.

It involves determining who will care for your children, and with

what finances, should you meet an early death.

It involves structuring your finances so that your surviving spouse

and beneficiaries are well taken care of.

It involves strategizing the best way to minimize the costs of dying

and most efficient way to pay the costs of dying.

It involves determining who should handle your finances should you

become incapacitated through injury or disease such as

Alzheimer’s.

It involves determining who will make medical decisions for you

should you be incapable of making them for yourself.

It involves determining if your beneficiaries are mature enough to

handle a large, lump sum of money, or whether they would benefit

from having someone manage money for them so that it is

distributed over a number of years.

2. why you need to do estate planning？

Because putting it off could be risky. In estate planning, you

may only get one chance to properly plan your estate. When you

die, the risk of losing your capital due to a variety of reasons

including Probate costs, Legal and Accounting fees, State

inheritance taxes, Income taxes and yes, possibly federal estate

taxes -- and the risk of never recouping your losses is much greater

than in the world of investments. This is because those losses are

real losses and not paper losses. In the investment world, losses

may only be on paper and around the corner there may be another

good investment opportunity.

But in the estate planning world, a missed opportunity can be

significant. A missed estate planning opportunity could result in

having your assets pass to the wrong heir at the wrong time and in

the wrong way – or in not having the liquidity needed to provide a

life income to your spouse, partner and children. It might result in

your heirs having to sell real estate, a business, or other precious

family assets at a deep discount simply because they can’t or don’t

know how to manage them or need to raise funds needed to pay

estate costs. Or it may result in your inability to buy life insurance

at a good rate.

In estate planning, a missed opportunity could become a

financial disaster for you and your family. No one knows how much

time you’ll have to plan your estate.

3. what specific strategies are available？

One strategy to benefit your heirs during your lifetime - gift

tax-free - is to make annual gifts under the Annual Gift Tax

Exclusion. Under this exclusion, each year, you can give up to

$14,000 to as many people as you want without any tax

consequences or filings. If you are married, you can give up to

$28,000 to as many people as you want in any given year, if your

spouse consents to the gifts.

Married couples have another strategy available to them. It is

called the unlimited marital deduction. Anything and everything

that you give while alive or leave at death to your U.S. Citizen

spouse is gift and estate tax-free. There is no dollar limit on this.

Transfers made by Will, by beneficiary designation, or by contract

qualify. If you take full advantage of this at your death, your

“taxable” estate will be zero.

Another strategy available to all taxpayers is the Applicable

Exclusion Amount. This is the Amount that can be transferred

exempt from federal estate, gift and GST (Generation Skipping

Transfer) tax.

You could also review your Wills and Trusts. You should make

sure they are: 1.Tax efficient; 2. Protect your heirs and assets; 3.

Remain flexible so they can accomplish your objectives.

Perhaps a better strategy is to use a Will that takes advantage

of both the marital deduction and the exemptions of both spouses –

regardless when death occurs. This type of Will is often referred to

as an “A/B” Will. Many people find that an A/B will is preferable –

not only because it allows the couple to take advantage of EACH of

their estate exemptions but because it provides benefits that only

trusts can provide.

The final strategy is irrevocable life insurance trust. For

wealthy individuals, it is important that new life insurance acquired

to help pay federal estate taxes not add to the estate tax problem

by being included as an asset of the estate. Therefore, a third

party, such as an irrevocable life insurance trust should be the

owner and beneficiary of the policy. An irrevocable life insurance

trust owns and is the beneficiary of a life insurance policy. A

properly structured irrevocable life insurance trust can help an

estate avoid the estate taxes that would otherwise be due following

death when an insured owns a life insurance policy.

4. what barriers should people take into consideration？

Final expenses can reduce the size of your estate before assets

pass to your beneficiaries. These can include: debts and mortgages;

funeral bills; medical bills; probate expenses and taxes. Your

beneficiaries stand in line behind all of the above to receive their

share. They get what is left. Without proper planning, they may get

a lot less than you think. However, with planning these costs can

be anticipated, managed and, in many cases, reduced.

5. Why small business need succession plan? Without a

formal written succession plan, what will happen to small

business?

There are several reasons why businesses fail. Studies show that

businesses often fail for lack of planning for growth and poor

management of the company’s financials. In addition, the lack of a

succession plan for the loss of an owner is often an issue when it

comes to the longevity of many small businesses.

6. What is buy-sell agreement? What does it contains? How

will the buy-sell be funded?

A Buy-Sell Agreement is a legal document that defines the

rights of buyers and sellers with regard to interests in a business.

Specifically, the buy-sell agreement contains: Who will buy the

business entity? At what time will the purchase happen? What price

will be paid for the business? What are the stated terms of the

transaction? Finally, the buy-sell agreement should set forth a

method of valuing the business.

Several methods of funding business owners are used to ensure

the Buy-Sell Agreement will have the liquidity it needs. These

methods include:

Borrow the Funds: The company needs to pledge assets of the

business. This usually requires the commitment of future profits to

pay for the business interest. Obviously, this is a disadvantage for

the heirs and surviving owners.

Save (Sinking Fund): Good in theory, but wouldn’t you prefer

the option to use savings to fund the additional growth of your

business or for some other business need? In addition, there may

be adverse tax ramifications of using a sinking fund.

Installment Sale: An installment purchase is often involved in

the retirement of an owner. It allows the management team to

purchase a business interest over a number of years. However, this

solution entails long-term debt which will expose you and your

heirs to the risk of the company not being able to satisfy its

obligations under the installment sale, clearly another

disadvantage for you or your heirs.

Life and Disability coverage: As we will see, life and disability

insurance offer many advantages over the other methods of

funding. Not only in terms of costs, but more importantly in terms

of expediency in getting cash into the hands of the surviving

owners or heirs.

7. What methods could be used to value the business?

When you are ready to sell your business the principal objective

should be to receive the fair market value for your business

interest. A Buy-Sell agreement can help you achieve this by

establishing a valuation process. The valuation of the business may

be determined in several ways:

Appraisal: the business should consider utilizing professional

appraisers.

Stated Price: The agreement may contain an agreed upon price

that must be reviewed and updated. This value should be updated

periodically with assistance from your professional advisors such as

your CPA.

Formula: Formulas can be used to accurately reflect the fair

market value of the business. A formula should be reviewed

periodically to insure that it reflects any changes in the business

that will impact its fair market value.

8. What are the three forms of buy-sell agreement? What

factors should be considered when choosing the best

form?

There are essentially two forms of buy/sells:

Redemption/Entity, which is between two or more parties, and

Cross Purchase, which is between two or more parties.

When a non-owner of a business agrees to purchase the

business interest of an owner, the agreement is known as a

unilateral Buy-Sell. A unilateral Buy-Sell is typically between an

owner of a business and a key employee, apprentice or protégé.

Only one party is to sell and one or more non-owners to buy the

business at the retirement, disability or death of the owner.

There are a multitude of factors which must be weighed when

determining which type of buy-sell agreement is right for your

situation. One could choose the right type by comparing the

advantages and disadvantages of each type.

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1. Why everyone should plan retirement in advance? What

are the benefits?

The business world has changed over the years with regards to

retirement plans. Many employers are choosing not to adopt

defined benefit pension plans and some are even terminating

existing ones. That means much of the responsibility for saving and

investing for retirement will fall on you. In 2010, only 27,500

defined benefit pension plans remain, covering only 19% of

workers. But even those who have a pension, overestimate how

much it will cover. 50% of those with a pension think it will cover

50 - 99% of their needs in retirement. In reality, it may cover less

than 50%.3

2. What steps could people take to ensure adequate

retirement income?

According to the 2011 study, “Best-Case Strategies for a

Flexible Retirement: The MetLife Study of Thinking About

Retirement in Uncertain Times”, people who had a stream of

guaranteed retirement income felt more confident in their

retirement plans.

You should do your own financial checklist towards your

retirement, which include pension benefits from previous & current

employers; social security benefits;401(k) plan or IRA assets;

personal savings and investments; part-time jobs.

You should also calculate your retirement savings mileage,

include assess your income resources, determine living expenses

calculate the difference and determine if you need to save more.

3. What are biggest concerns for retirement? What are

Essential Expenses – How much will cover them?

According to the 2011 MetLife Retirement IQ survey, having

enough money to cover essential expenses is the number one

concern among pre-retirees. So one thing one should do is to

assess your income resources after retirement. Another thing is to

determine essential living expenses. Based on these two, one could

calculate what percentage of pre-retirement income will cover

essential expenses in retirement; as well as how much of your pre-

retirement income will you need to maintain your standard of living

in retirement. Many financial professionals suggest that you will

need up to 100% of your pre-retirement income to live a

comparable lifestyle during retirement.

Essential expenses are the regular bills that we all have to pay.

Things like: housing (rent/mortgage); food; healthcare;

transportation; insurance; utilities and taxes. Sixty percent of pre-

retirement income will cover essential expenses in retirement.

4. What are three common risks towards retirement

security?

The three common risks are: inflation risk, market risk and

longevity risk

Inflation risk is always present in our lives. While you are still

working, you may receive regular pay increases and the impact of

inflation may not be as obvious. But once you retire and live on a

fixed income, the increasing cost of basic necessities, such as food,

housing, and health care, can force you to cut back your spending

and reduce your standard of living.

For market risk, downturns can sideline you early in

retirement. All investments are subject to some risk. Downturns

can be especially problematic in the early years of retirement.

Longevity risk -- risk of outliving retirement assets -- is

probably the greatest risk that retirees face today. We can’t predict

exactly how long we will live, but we know that if people are living

longer today and spending more time enjoying retirement, so it’s

better to prepare for your income to last beyond the averages.

5. In light of these hazards, what can you do to make sure

that you are financially secure throughout retirement?

How can you guarantee that you will have enough income

to last your lifetime, no matter how long that may be?

One way to help ensure that you have income for life is by

designing a product allocation strategy that may include several

product types – like traditional investments, income annuities,

variable annuities and other financial vehicles.

A product allocation strategy can help you prepare for external

factors that are beyond your control. For example, a market

downturn at the wrong time can significantly reduce your

retirement savings. The years right before and right after

retirement, your money is most susceptible to market risk. This is

when you typically have the most money to lose. Negative returns

during this period could cause a significant reduction in your

retirement savings. A product that offers stable guaranteed income,

regardless of what the market does, can help you prepare against

this risk.

Overall, utilizing a number of different product categories may

help reduce or manage risks, maximize income payments

throughout your lifetime, maintain some liquidity and satisfy legacy

needs. Since different products have different benefits, combining

products may help you better accomplish retirement income goals.

Overall retirement strategies include retirement savings

options and tax qualified retirement plan.

6. What are the two types of Employer Sponsored IRA Plans?

Could you explain it in detail?

Employer Sponsored IRA Plans are programs where the

employer makes deductible contributions to the employee’s

individual IRA account. There are two types – Simple IRAs and

Simplified Employee Pensions (SEPs).

The Simple IRA has an employee salary deferral feature. The SEP

does not.

The rules that apply to Simple IRAs and SEPs are different from

those that apply to Defined Contribution and Defined Benefit Plans.

However, the limits are on the contributions so they are similar to

defined contribution plans. In both plans, the employer makes

contributions to the employee’s IRA.

The Simple IRA has an employee salary deferral feature. The

SEP does not.

Employer contributions in a Simple IRA are in the form of a

required match which is made when an employee makes a salary

deferral. Employer contributions to a SEP are fully

flexible/discretionary – they are not required.

These plans do not have as many design options as the ones we

discussed up to this point.

Qualified plans are an integral part of any business owner’s

overall retirement strategy. They provide current income-tax

deductions to the business and serve as tax-deferred wealth

accumulation vehicles. Different plan designs accomplish different

things. Therefore, the plan design is critical to maximizing the

efficiency of a retirement strategy for you.

7. What are benefits of social security? What qualifications

should one have to get those benefits?

According to the American Association of Retired Persons

(AARP), Social Security provides benefits to 55.4 million

Americans. As recipients of Social Security benefits, here is what

they receive:

• A stream of income payments that can last as long as you live

or as long as both you and your spouse live.

• Potential income adjustments to help you keep pace with

inflation. Basically, if the CPI goes up, your Social Security

benefits will go up as well.

• Survivor benefits. If you pass away unexpectedly, Social

Security will provide certain benefits for your surviving

spouse and dependent children.

• Disability benefits for you and certain members of your family

if you are "insured," meaning that you worked long enough

and paid Social Security taxes.

To be eligible for Social Security benefits, you need to earn a

certain number of credits by working. In 2013, you can earn one

credit for every $1,160 you make in income. You can earn a

maximum of 4 credits per year, and will need 40 credits total in

order to be eligible for benefits at your full retirement age. Some

Federal employees and employees of State or local government

agencies may be eligible for pensions that are based on earnings

not covered by Social Security.

8. What factors should one take into consideration to decide

when to take the social security benefits?

One of the first questions you’ll want to answer is do you need

income right away? When you begin to take the benefits? You have

the option to start collecting your benefits anytime between age 62

and age 70. However, if you collect before full retirement age, you

will collect reduced benefits. If you wait until full retirement age,

you will be eligible for your full benefits (also known as your

primary insurance amount). If you wait until after full retirement,

you will be eligible for an increased benefit.

Another factor is if you are married. If you are married, you

have the option to take spousal benefits. That means, instead of

taking benefits based on your work history, you would take benefits

based on your spouse’s work history. As a spouse, you would get

50% of your husband or wife’s benefit. But this only works if both

of you are at full retirement age.

Another thing that can affect when you would want to start

taking benefits is your health and the health and longevity in your

family. This can be a good indication of how long you might live.

You may want to keep that in mind as you develop your retirement

income strategy, knowing that your Social Security benefits will be

greatest if you wait until age 70.

The final thing one need to consider is if you are still working.

Social Security benefits are intended to be supplemental retirement

income. So the SSA really wants you to be retired when you collect

them. Therefore, they will penalize clients for collecting early if

they are not actually retired. If you collect benefits early, you will

be subject to an annual earnings test which looks exclusively at

salary. Prior to full retirement age, if you earn more than the

threshold amount ($15,480 in 2014), you lose $1 of benefits for

every $2 earned over the threshold. For the year in which you

reach full retirement age, a different rule applies. The threshold is

$41,400 in 2014. And the rule is that you lose $1 in benefits for

every $3 in earnings over the threshold. Once full retirement age is

reached (in August and beyond), there is no threshold so you can

earn any amount after that with no reduction in benefits.

9. What are tools one could use to help to estimate the social

security benefit one could get?

There are some online tools you can use to get started planning

and taking Social Security benefits.

At the Social Security Administration website – www.ssa.gov –

you can view your benefits statement and apply for benefits. They

also have a lot of education information, if you want to learn more

about the benefits themselves.

The American Association of Retired Persons (AARP) also have

a great website – www.aarp.org – including a section on Social

Security, where you can find articles and calculators to help you

decide when to take Social Security benefits.

You can also go to MetLife’s website and use our Retirement

Income Snapshot tool, which can help you determine if you have

enough income for retirement.

10. Could one get his social security benefit while he is still

working?

If you take Social Security benefits before your full retirement

age and continue to work, you will lose $1 of benefits for every $2

you earn above a specific threshold, which in 2013 is $15,120

annually or $1260 a month. However, if you wait until full

retirement age to begin taking benefits, you can continue to work

or go back to work without being penalized.

11. Should people pay taxes on social security benefits?

Social Security benefits may be taxed, depending on your

income when you take benefits. The tax you pay is based on a

formula that includes your Adjusted Gross Income (without regard

to certain deductions and exclusions), nontaxable interest and half

of your Social Security benefits.

See the below table:

Single Married Taxed or Not?

$25,000 or less $32,000 or les No Tax

$25,001-$34,000 $32,001-$44,000 Up to 50% of benefit

is taxed

$34,001 or more $44,001 or more Up to 85% of benefit

is taxed

12. How to maximize your social security benefits？

How to maximize the social security benefits depends on

everyone’s own situation. There are a bunch of factors could affect

if one could get the most benefits. Several main factors include: do

you begin to take the benefits before or after the full retirement

age; the marital status; your current health, your family history of

longevity.

Here’s one example of a couple who take advantage of spousal

benefits. In this case, the wife’s benefits are quite a bit less than

her husband’s. Both husband and wife are the same age. The wife

files and starts receiving her own reduced benefits at age 62. But

then at age 66, the husband files for benefits. This lets his wife

receive spousal benefits, which are more than she was getting from

her own benefits.

But, since the couple is trying to maximize their benefits, the

husband should suspend his own benefits (doesn’t take them at age

66), and don’t start until age 70. That’s the latest he can start his

own benefits. In this way, he could also receive the maximum

benefit. By using this strategy, the couple is able to maximize their

benefits when they really need them – which is later in life.

13. Does Social Security benefit/Medicare cover long term

care ?

Long-term care is a range of services and support for your

personal care needs. Most long-term care isn't medical care, but

rather helps with basic personal tasks of everyday life, sometimes

called activities of daily living.

There are six basic activities of daily livings: eating, bathing,

dressing, toileting, transferring (walking) and continence.

Medicare doesn’t cover long-term care (also called custodial

care), if that's the only care you need. Most nursing home care is

custodial care.

Medicare does cover: care in a long-term care hospital，skilled

nursing care in a skilled nursing facility ， eligible home health

services， and hospice & respite care.