Source: http://www.google.com/patents/US7149712?dq=3798360
Timestamp: 2014-09-02 18:56:24
Document Index: 173450858

Matched Legal Cases: ['arty 2', 'arty 1', 'arty 2', 'arty 1', 'arty 1', 'arty 2', 'arty 15', 'arty 15', 'arty 17', 'arty 15', 'arty 3', 'arty 1', 'art 1']

Patent US7149712 - Method for financing future needs - Google PatentsSearch Images Maps Play YouTube News Gmail Drive More »Sign in<nobr>Advanced Patent Search</nobr>PatentsA method for financing future intentions of a first party (1, 15) pursuant to a first contract (4, 18) with a second party (2, 16) for a specified monetary sum. A contract (5, 19) involving a variable annuity is obtained from a third party (3, 17). A guaranteed benefit equal to at least the specified...http://www.google.com/patents/US7149712?utm_source=gb-gplus-sharePatent US7149712 - Method for financing future needsAdvanced Patent SearchPublication numberUS7149712 B2Publication typeGrantApplication numberUS 10/905,275Publication dateDec 12, 2006Filing dateDec 23, 2004Priority dateNov 1, 2002Fee statusPaidAlso published asUS20050086144Publication number10905275, 905275, US 7149712 B2, US 7149712B2, US-B2-7149712, US7149712 B2, US7149712B2InventorsAlan J. LangOriginal AssigneeLang Alan JExport CitationBiBTeX, EndNote, RefManPatent Citations (9), Non-Patent Citations (6), Referenced by (12), Classifications (9), Legal Events (1) External Links: USPTO, USPTO Assignment, EspacenetMethod for financing future needsUS 7149712 B2Abstract A method for financing future intentions of a first party (1, 15) pursuant to a first contract (4, 18) with a second party (2, 16) for a specified monetary sum. A contract (5, 19) involving a variable annuity is obtained from a third party (3, 17). A guaranteed benefit equal to at least the specified monetary sum is paid to the second party by the third party to pay for the fulfillment of the future intentions of the first party. The variable annuity has a guaranteed annual increase.
CROSS REFERENCE TO RELATED APPLICATIONS This application is a continuation-in-part of U.S. application Ser. No. 10/287,050, filed on Nov. 1, 2002 now abandoned, the disclosure of which is incorporated herein by reference.
BACKGROUND OF THE INVENTION This invention relates to financial business methods and systems, and more particularly to a method and system for financing future needs or intentions upon the death of a person. Additionally, it relates to a method and system for investing long-term assets of private and public foundations and nonprofit organizations such as 501(c)(3) tax exempt charities.
Some of the major issues relating to the payment in advance for future services concern portability, cancellations, additional costs not disclosed up-front, refundability, and lack of ability to change or alter the services needed by the client, such as changing the burial plan to a crematory plan. Present practices either result in an outright forfeiture of all the money paid or severe penalties when some or all of the above occur. Moving of elderly parents from one state to another in order for the children to care for them has been a major cause of the �portability� problem. Funeral homes simply do not have the ability to transfer the contracts to other states.
This has led to even more problems with the monies required to be placed in trust accounts and the ability of the funeral home to access those funds. In cases of outright fraud, some funeral homes and cemeteries simply refuse to put the money into trust accounts until they are discovered. Some states require 100% of the monies be placed in trust and others only require as little as 50% be placed in trust. Some states allow annual withdrawals of amounts placed in trust. Furthermore, many funeral homes have requirements concerning trust funds that differ from the cemetery's requirements concerning trust funds, and, furthermore, �services� have requirements for handling trust funds that differ from �merchandise� providers.
Presently, however, nonprofits must accept market risk of losses. Along with losses comes a corresponding drop in annual income. Because of this risk, they are forced to allocate a large proportion of their assets to �safe�, low return, fixed income type investments. These types of investments offer no growth potential to the principal, only a perception of �safety� because of the guaranteed return of principal along with a fixed-dollar annual return. This leaves less money to be invested for growing the principal. The annual income, under this conventional approach, is thus restricted to these low-yielding investments.
Combine this �safe,� principal-protecting strategy with the losses in the principal that occur during market downturns, recessions, and the like, and the result may typically be a declining annual cash flow with which to fund the nonprofit's programs. This annual income is key to funding both the day-to-day operations of the nonprofit as well as the programs they are designated to administer. (Scholarships, payments to donors, charitable programs).
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SUMMARY OF THE INVENTION One object of the present invention is to provide the numerous benefits to both the person needing the future services (hereinafter referred to as the �Client�), and the �Second Party� (the entity providing the services), among those benefits being the following:
The Client is not required to pay any amount �up-front� to the Second Party, which eliminates the need for current trust revisions; The Client has control of the contractual arrangements with the Second Party until the Client's death; The Client then may move anywhere at any time without having to request or negotiate a refund; The Client may change the beneficiary (i.e. the funeral home or cemetery) at will; The Client may change the Second Party providing the services at will; The contractual arrangement is tax-deferred and the Second Party (as beneficiary) is responsible for any income taxes; The contractual arrangement is not subject to probate, eliminating any delay in payment to the funeral home or cemetery due to court proceedings; The Client's money for future services is 100% invested in mutual funds which are held in a separate account by the insurance company, eliminating the possibility of being spent or attached by creditors in the event of bankruptcy; The Second Party is protected against inflation by the guaranteed annual increase of the death benefit; The Second Party receives a guaranteed minimum rate of return to help cover the ever-increasing future costs of providing the services; The Second Party is additionally benefitted by any and all increases in the market value of the mutual fund investments because, at the death of the Client, it will receive the highest of the guaranteed minimum increase or the market value of the investments; and The Second Party is entitled to 100% of the death benefit proceeds in the contract. The present method and system achieves the above objectives and benefits by providing a method and system to finance future needs involving two contractual arrangements instead of the conventional one contractual arrangement currently in use. The first contractual arrangement is between the Client who needs future services and/or goals and a Second Party that can provide for the future needs and services. The second contractual arrangement is between the Client (or, in some cases, the Second Party) and a Third Party to provide a monetary sum to pay for those needs upon the death of a Client.
The Variable Annuity Contract (VA) 5 has certain characteristics. It pays a guaranteed death benefit with a guaranteed increase. That is to say, it may increase by a minimum set percentage (usually between 5% and 7%) annually and permanently lock in the increase on every anniversary date of the contract, to be paid as an amount 6 b to the Second Party 2 upon the death of the First Party 1. Additionally, the VA 5 may include an immediate bonus (usually 3% to 5%; this actually amounts to a �discount� of 3% to 5% for the client) that is added to the deposited amount, depending on the age of the Client 1. The Second Party 2 which may be a funeral home, cemetery, trust, or the like, is then named as the sole beneficiary of the VA 5 and is entitled to receive all of the profits from the VA 5. The First Party 1 remains the owner and annuitant of the VA 5, thus retaining all power and control over changes in the VA's beneficiary during the life of the First Party 1, a distinct advantage over conventional contractual arrangements because the costs involved are now guaranteed by the death benefit (death benefit 6 a is now guaranteed). As a separate part of the new contract, the money may be safely invested in mutual funds for maximum market growth. The Second Party 2 is now assured that it will never receive less than a 5% to 7% growth 6 b on the deposited amounts and possibly may receive even more (also represented by 6 b) if the underlying mutual funds grow at a higher rate.
A first party donor 15 identifies the need for a charitable contribution to a second party charity 16 which could be a permanent endowment fund, charitable remainder trust, charitable lead trust, pooled income fund, charitable gift trust, donor advised trust, or the like. The aforementioned may be thought of as �long term� types of investments and demand protection of principal and a guaranteed income stream. The First Party 15 enters into a contract 18 for a charitable contribution which, in the case of �donor advised funds�, provides that the First Party 15 is to direct the annual gifting. Under conventional practice, a charity 16 would then invest the contribution into a combination of stocks and/or bonds, and accept the usual risks of fluctuating interest rates and the rise and fall of the stock market and bond values.
Next, in step 23, the contribution is used to purchase a variable annuity contract 19 from a third party 17. The second party charity 16 is named as the Owner and Beneficiary while the first party 15 donor is usually named as an �annuitant�, depending on the Donor's age at the time of the initial contract. A unique feature of the �annuitant� in all VAs is that it may be anyone, due to the fact that it does not have any ownership rights, interest in, or control over the contract. In the cases of trust-owned annuities (which is the case with substantially all charities or foundations) the �annuitant� is merely lending its life expectancy to the organization because the death benefits will be paid upon the annuitant's death. The reason for this is that a trust cannot die; therefore, there must be a living person upon which to base the death benefits.
It will be appreciated that the variable annuity contract is handled in a manner well known to those familiar with this general field, namely, by recording certain information in a computer system. In particular, the guarantee death benefit and guaranteed annual increase may be recorded in a computer system. The use of a computer system is important because it permits the large scale handling of administration of the annuities, and because it facilitates the calculation of the amount to be paid upon the death of the first party. In particular, the calculation by the computer system will determine an amount to pay, and the amount will be based on a variety of factors including, but not limited to, the guaranteed annual increase and also the timing of the death of the first party. Amounts paid during the life of the first party may take into account the timing of death of the first party by noting that the timing is yet to occur. Thus, �the timing of the death of the first party� is meant to be broadly understood.
According to this exemplary embodiment, the church oversees an endowment fund or the like. The First Party church 1′ has the intention of growing the principal and also having a cash flow. To this end, in accordance with the invention, the First Party church 1′ makes an agreement 4′ with the Second Party member 2�to fulfill the First Party�s intention of growing the principal while having cash flow. Under the agreement 4′, the First Party church 1′ names the Second Party member 2′ as an annuitant in a VA 5′ purchased from the Third Party 3′. As in the second embodiment, the annuitant (here the Second Party member 2′) has no ownership rights, and serves only as a basis for the VA 5′ in terms of the calculation of the life expectancy and determination of when the guarantee death benefit 6 a′ of the VA 5′ is to be paid. The VA 5′ includes a guaranteed increase in the death benefit, and the First Party church 1′ achieves an annual cash flow by annually taking payment 6 b′ of the guaranteed increase. When the Second Party member 2′ dies, the guarantee death benefit 6 a′ is paid to the First Party church 1′. Of course, if the value of the principal has a market value higher than the guarantee death benefit (due to wise investing of the principal, or the like), the market value of the principal 6 a′ is paid to the First party church 1′.
FIG. 6 shows a fourth embodiment according to the invention, involving a third charitable scenario. In FIG. 6, the First Party 1″ is a person who purchases a VA 5″ that pays the cash flow 6 b″ to himself while alive, and pays the guarantee death benefit 6 a″ to a Second Party charity upon the First Party's death. The VA 5″ has a guaranteed increase, so that the First Party can plan on at least a minimum cash flow 6 b″. Technological Notes
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