Case Studies

Mr. Smith, a businessman, age 55, has two issues he wishes to address with his advisors.

• Mr. Smith, having amassed substantial wealth had an Estate tax issue.
• Additionally, he wanted to leave his favorite charity a sizeable sum of money, and would ideally like do so without liquidating substantial current assets.

After analyzing his situation with our actuary and finance team we determined he was eligible for $30,000,000 in life insurance coverage today. With annual premiums of $2,041,305 a year for 7 years, our client would have had to sell a number of properties or liquidate some of his high yielding stocks to pay the premiums.

"......financial solutions optimized for today, enduring through tomorrow."

 

• Using our Life Insurance Premium Financing Program, Mr. Smith was able to purchase the coverage he needed without utilizing cash. He also had the peace of mind knowing that he was not placing any personal guarantee on the loan. Instead, for a period of time, he provided a collateral assignment of some property which was released when the cash value in the policy was high enough to repay the loan for the premium.

• The example is as follows: Mr. Smith designates the policy beneficiaries to be his family and charity at 50% each. Mr. Smith passed away 11 years into the plan the loan balance is $25,448,550 including accrued interest. When deducted from the now $44,289,141 death benefit (DB increases over time). The net tax benefit to each beneficiary is $9,420,295.

• Should Mr. Smith's insurance needs change at any time during this period, there are several exit strategies which could have been implemented allowing full repayment of the loan principal and interest, and possibly have provided him a net gain.

In essence Mr. Smith provided the significant, tax free amount of $9.4 million to his heirs and $9.4 million to charity without having to expended any money or assume personal responsibility for the loan. Mr. Smith did however during the first 7-9 years of the policy provide the collateral necessary to secure the policy.