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A Publication of Business & Estate Advisers, Inc.


But Mom!
by: Sarah Kaelberer, CFP

If you have kids, of any age, you have heard "but mom" before! Most of you know, about a year ago (ugh! Has it been that long!) I gave birth to my little boy Max. He was the third child in less than 5 years. Miranda, our oldest, just turned 5. Chloe is every bit of 2-1/2 years! And then Max, just one. Our house has been full of love, laughter and, needless to say, noise! But in all that love, laughter and noise, some very special moments have been shared, and there are always lessons to be learned...

Accomplishments Come In All Sizes

It's 8:15. Bath time usually starts by 7:50. I am just putting the two girls in the tub. 25 minutes behind schedule; a perfect ending to a hectic day! As the girls start splashing and laughing my mind is listing everything I did not get done that day, which I thought was just about everything on my list! I sighed. Miranda asks "What's wrong?" I explain to her that I did not get anything done. In her usual style, she begins listing everything I did. "But you helped me build a house for Caddy, you washed blanky when I spilled milk, we played Hungry Hippos and you took care of Max." I smile and, not minding that I was going to get wet, leaned over and hugged her. She did not mention dinner. My husband would have. She did not mention work, Dennis and the staff would have. She did not mention cleaning (which I seem to be the only one to notice). She mentioned what was important to her. I made her day because I had time to do the little things she needed. They are little to me, but not so little to a then 4-year old.

Get Up And Dance

...The infamous "But Mom!" came out...

Every morning I let the kids watch a show on Public Television during breakfast. Halfway between the cartoon, the show stops and the characters sing a song, encouraging the views to get up and dance. When this show first came out, they would jump out of their chairs and start running around. I did not have a clue as to what they were doing and would insist they stay at the table until breakfast if done. The infamous "BUT MOM!" came out. "This will give us more energy!" Have you seen my kids lately? More energy is <I>not</I> what they need!

More energy is what I need. So now I "get up and dance" to the songs with them. Not only does 5 minutes of stretching and moving help me get started, it also give me one more fun thing to do with my kids!

I Can Do It! Watch!

So often I think of what they cannot do. Then I take extra time to tell them how to do something they already know how to do. Then, when they do something they (and I) did not know they could do, I am not watching. Wait; am I talking about my kids, my husband or my office? Well, all of them! I am constantly reminded by all of them. Miranda, being her mother's child, can be a little too particular about the way she does some things. So, when I started to tell here <I>how</I> to clean up her Barbie's, the door was promptly closed with a "I know Mom, let me do it!" After about 10 minutes she proudly came down stairs and invited my up. (Hint: don't let an almost five-year-old lead you up the stairs with your eyes closed!) When she opened the door to her room, not only was every Barbie in her proper place, her bed was even made! She was so proud of the Super Tornado (which apparently is the tornado that comes in to clean after the tornado that makes the mess). First, find out what they already know. Then instruct if they need it. And lastly, acknowledge that they did it!

Laugh A Lot!

She's not a Financial Planner. She's not a Business Person. She is not a Church Volunteer. She is not a Rotarian. She is not a Wife. She is not a daughter. She is my Mom and she is Silly! She did not understand that the teacher was referring to occupation or volunteer work. Miranda started explaining how her mom makes up funny words to songs and pretends to server brussel sprouts and hasenpfeffer for dinner. Sometimes it can be so easy for me to get caught up in my schedules and lists. What do I have to do, when and for whom? Some days it seems like an endless list. But each day, I make time to make my kids laugh. I always figured they would remember and appreciate that. Andy they do! But why not try to make everyone smile? So what if they don't know you. They will know how you made them feel.

So these are some little lessons my little one have taught me. I smile as I think of them. And my smile widens as I think to take them beyond the walls of my home. While I may not get everything done, I always get something done. And when stress gets to me, I should stand up and do a little stretch or dance. I need to trust that others can get things done. I should see what they know and if they need help, before offering instruction. I must remember to give praise for a job well done! And last, but certainly not least, small jokes and friendly eyes can make a world of difference to someone having a bad day. Every day is an adventure, especially in my home. And every day there is a lesson waiting to be learned, as long as I just stop and listen.

E. Dennis Zahrbock, CFP


By E. Dennis Zahrbock, CFP

In June, with please and pride I accompanied Sara Kaelberer, CFP to her first MDRT meeting. MDRT membership is earned by less than 5% of insurance and financial professionals. Sarah not only earned membership in her first year of eligibility she also was honored to be a speaker on 401(k) plans. It is truly excited to have served as mentor to Sarah's success

Along those lines it is with more please and pride to welcome my son-in-law Steve Bowman to the firm. Steve received his MBA from the University of Denver in May and became the Wealth Management Specialist at Business & Estate Advisers, Inc. on July 1st. With myself being the "old pro", and Sarah being the "new pro", we are excited to mentor our new rookie to becoming a pro.

It also great fun for Sue and I to have daughter Lori back in Minnesota, not to mention having granddaughter Addison and first grandson "Mallard Teal" expected to arrive in late duck season!

The first week of September allowed friends and business colleagues form throughout the United States to enjoy business discussion and fishing action on Molson Lake in Northern Manitoba. Industry pros Dan Rigby (Phoenix), Dale Young (Oklahoma City), and Roger Grove (Los Angeles), showed why they are professionals in financial services and not in the sport of fishing. To view some of the action check out http://www.molson-lake.com

The Retirement Planning segment of our business was formally launched as a division of Business & Estate Advisers in July. We felt we had been helping people accumulate money for years in our Pension/401(k) division so why not further help the participants with spending and retaining assets during their retirement years. Educational seminars in the metro area as well as Greater Minnesota and Northwest Wisconsin are already scheduled monthly throughout the next year.

Congratulations to Steve Bowman for passing his Series 7 (securities license) exam with a passing score of 88%! The national average is 74%. He also passed his Insurance Exam with a passing score of 88%! Way to go Steve!

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September 2001

Dennis & Sue spent a week in France being honored as members of the Top 1% of MetLife's three companies (Met, New England & General American)

Sarah's oldest daughter, Miranda, started Kindergarten.

Dennis, sons-in-law Greg Loxtercamp and Steve Bowman open the duck-hunting season on the Delta Marsh in Manitoba Canada.

October 2001

Dennis will travel to St. Louis as a member of General American's Advisory Council. He will later return to attend Top Gun advanced education seminar.

Business & Estate Advisers will be sponsoring Jules in the City of Hope Breast Cancer Walk-A-Thon and Diabetes Awareness Walk-A-Thon, each 6 miles walks.

November 2001

Dennis is to be featured speaker at the Northeast Wisconsin Association of Insurance and Financial Planners and also at the Chicago Association of Insurance and Financial Planners.

Sarah and Darvin take their semi-annual trip to the Black Hills.

December 2001

Dennis and Sue are scheduled to go to Branson, Missouri to visit retiring Chief Underwriter Paul McDaniel and his wife Sylvia. Over the years the couples developed a friendship that goes beyond business.

January 2002

Business & Estate Advisers to hold 2nd Annual Staff retreat at the Silver Pine Lodge.

February 2002

Dennis & Sue intend to return to Mission Jamaica for the fifth year in a row.

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Newest Advisory Board Member
Christopher T. Nelson
Christopher P. Nelson

Senior Pastor

Bethlehem Lutheran Church

Q: How did you first become acquainted with Business & Estate Advisers? Through Dennis, member at St. Philip the Deacon, when I served there. He helped us with saving for our children's education.

Q: During your association, what has Business & Estate Advisers done for you? Helped grow our assets, helped us set up a plan to meet our goals and worked well (efficiently) with our investments.

Q: What, in your opinion, makes Business & Estate Advisers different from other financial services firms? They are known, frank conversations about goals and how to get there. We are cared about and for. Business & Estate Advisers (Dennis) helped when we had very little and was still very interested.

Skip-A-Day 2001
Layered up once again...
Good thing we gave away sweatshirts
Skip-A-Day 2001

Mark your calendar for Skip-A-Day XVIII on May 20, 2002!


Stephanie Zahrbock
Stephanie Zahrbock and husband Greg Loxtercamp are proud new parents of Sabrina, who joined the Zahrbock family on May 2, 2001! Could she more adorable?


Business & Estate Adviser's
"Tips for Teens"

Volume 5 Issue 4

Edited and Revised by Business & Estate Advisers, Inc. as an insert to our newsletter

By: E. Dennis Zahrbock, CFP

In past "Tips for Teens" we've discussed everything from offense (stocks, bonds, mutual funds, etc.), to defense (insurance products), to referees (IRS) to one Secret to Financial Success.

In this issue our topic will be The Ugly Duckling or The Beautiful Swan. Although we have touched on it before, the subject will be Section 7702(b) or in more common terms Life Insurance.

Life Insurance is always difficult to discuss as many people "tune out" at its very mention. After having spent nearly 33 years in the industry there are a number of reason why Life Insurance could be considered an Ugly Duckling. Here's what I think the top 5 reasons are for it being called Ugly!:

REASON #5: Someone, a parent, a teacher, a magazine reporter has said it is bad and therefore it must be Ugly!!

REASON #4: The language of the insurance industry seems like basic English to those that are part of it but seems like advanced Chinese to those who are not. Where else do you find terms like settlement option, non-forfeiture value, cash value, surrender value, waiver of premium, etc. Ugly!

REASON #3: The concept of cash value insurance versus pure term insurance is very hard to understand. How can something appear to cost so very little when acquired as term insurance and so very much when acquired as cash value insurance? Ugly!

REASON #2: Respected mathematicians and financial type people can prove time and time again that the consumer get the short-end if cash value insurance is acquired. Ugly!

REASON #1: Most people that sell it don't really understand it. Some of those that do, still can't explain it! Thus, even people your respect and you know can sell it think it's bad so why would you want it! Ugly!

As I earlier state, I've been associated with the cash value insurance business for 33 years at this juncture and before I can try to say why something so "ugly" may be "beautiful" I need to help educate you on some facts of cash value life insurance.

Cash value life insurance is composed of the following ingredients:

1. A mortality charge which is the "risk expense" to cover those that die. Mortality charges are lower the younger you are, higher the older you are. It makes no difference how old you are when you acquire the policy. When you are age 99 the mortality charge will be very, very high as so few risks (people) are still in the pool (alive).

2. A deposit charge is assessed by the insurer on all premium deposits. This varies among insurers, but virtually all assess a deposit charge.

3. An administrative and overhead expense is charged by the insurer as its margin for handling the risk.

4. Finally, an investment markup is charged. This simply means that part of the investment gain is paid to the insurer.

5. On the positive side are two items: a. Annual premium deposit is estimated for the insured by the insurer based on the estimates of the four charges and an interest assumption. b. Annual interest assumption is an estimate of future investment returns of the insurer.

What many purchasers of today's cash value life insurance do not understand is that these "four costs" and "two gains" are not guaranteed. One, or all, of the six assumptions can change.

The Formula For Modern Life Insurance:

Beginning of year cash value + actual premium deposit + actual investment gain/(loss) - mortality expense - deposit expense - administrative expense - investment markup = year end cash value.

The formula is relatively long, but if understood, it can show why an Ugly Duck can turn into a Beautiful Swan. Before explaining how to make beautiful we must add the tax effects of Section 7702(b). For purposes of this discussion there are four important tax effects:

1. Cash value growth is not taxable as incurred.

2. FIFO accounting applies if money is every withdrawn. This means the premium deposits are allowed to come out first! Since premiums are paid with after tax income this means that withdrawals are not taxable until they exceed the premiums paid.

3. Loans may be requested by the policy owner. The policy cash value is the collateral. In Section 7702(b) policies these loans are not considered taxable income. Be careful though, for in Section 7702(b) policies they are!

4. At death of the insured the total death benefit is free of both income and capital gains taxes.

And, now, how do you make an Ugly Duckling into a Beautiful Swan? The best way to explain the transformation is to crate a hypothetical example:

Beginning Cash Value
Mortality Charge
Deposit Expense
Administrative and Overhead
Investment Gain ("net" 9%)*
Premium Deposit
End of Year Cash Value

* Assume gross return of 10% with a 1% investment fee deducted and then 9% of ($1,000 + $1,000) - ($500+50+50).

Other than the fact that we have life insurance, for the $500 mortality charge, this example still appears ugly.

In order to make it beautiful we need to voluntarily make larger premium deposits. To maximize "beautification", we need to make the highest premium possible under the law. Contrary to popular belief a low premium may not be the best deal for the insured!

Beginning Cash Value
Mortality Charge
Deposit Expense
Administrative and Overhead
Investment Gain ("net" 9%)*
Premium Deposit
End of Year Cash Value

Here we assume a deposit higher than $1,000 every year thus our same policy starts with $10,000. Why can an extra deposit make such a difference in our cash value growth? Mathematically the answer is very simple: 1) Mortality costs are the same, thus use less of the policy values. 2) Administration and overhead expense is the same. 3) Deposit charges are proportionally higher. 4) Investment gain is the same net percent.

To further grasp beautification, think of what happens in a taxable investment. You start with something, you add something, and taxes would take away something. Then you have an ending value. True beautification takes place when you discover that taxes are often higher that mortality, deposit, administrative, and investment expense combined.

Taxes should be included in every calculation, but are seldom fully discussed. Simply ask yourself "If taxes are 30% and insurance charges are less than 30% which would I prefer to pay?"

In all of our studies we have generally concluded that during the first ten years of a cash value life insurance contract cumulative taxes would be less than insurance expenses but after ten years cumulative taxes will be more that insurance expense! Just as it takes time for an Ugly Duckling to grow into a Beautiful Swan, it takes time to make cash value life insurance beautiful.

Today's Quiz:

  1. Cash Value Life Insurance is always a good place to accumulate money. Y N
  2. Mortality charges are higher if you deposit a higher premium. Y N
  3. If potential tax expenses exceed potential insurance expenses it is a good idea to accumulate funds in a cash value policy. Y N
  4. Life insurance is considered ugly because it is misunderstood. T F
  5. 7702(b) of the code can make cash value life insurance beautiful T F


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Business and Estate
Business & Estate Adviser, published periodically, is composed on a personal computer utilizing Microsoft Word 97 and Times New Roman typeface. Camera-ready copy is generated on a Hewlett-Packard LaserJet III printer. Gray-shades and printing by Wallace Carlson Company, St. Louis Park, Minnesota. For additional copies or information, please contact Michele Mattson at (952) 475-0440. Copyright © 1990-1999 Business & Estate Advisers, Inc. All rights reserved.

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