D,G in partnership with GB Financial now offers a unique life insurance solution for affluent individuals and families. Below is the summary of the benefits:
Traditional premium financed life insurance is a structure that enables affluent clients to acquire the insurance benefits they need, without impacting current cash flow and the possible cost of gift tax associated with purchasing insurance. This fully collateralized form of lending, whereby the borrower, typically an Irrevocable Life Insurance Trust (“ILIT”), borrows the life insurance premiums necessary to pay for a permanent life insurance policy, is specifically structured to complement a sophisticated estate plan. The ILIT is the borrower of record for the loan, which, from the lender’s perspective removes any credit and bankruptcy risk on the insured. From the insured’s perspective, the loan does not impede his or her borrowing capacity. The loan will be collateralized primarily by the policy’s cash surrender value and, if and when necessary, additional collateral in the form of cash, marketable securities or a letter of credit, posted, by the insured or corporation, on behalf of the ILIT.
The primary reasons for the insured to enter into a premium finance transaction instead of paying cash for the policy are: (a) it allows current investments and cash flow to remain intact; (b) to optimize estate planning and succession planning; and (c) to reduce and in some cases eliminate the gift tax liability that can be created when using current cash flow for life insurance. Successful execution requires proper structuring and long-term management of both the financing component and the insurance policy itself. The objective of the structure is to provide the client with a lifetime solution, whereby the loan will be repaid from policy proceeds at the client’s passing. Long-term success requires a collaborative effort whereby the firm designing, underwriting, implementing and managing the solution for the client works hand and hand with the insurance company issuing the policy and the lender making the loan.
For more information on this please connect with Chip Gibson.