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Premium Financing

PRIVATE PLACEMENT  •  PREMIUM FINANCING  •  FOREIGN NATIONALS

Premium Financing
The essence of premium financing, as the term suggests, is where the affluent individual takes out a loan to pay for his or her life insurance policy. The advantages of borrowing life insurance premiums are tangible and valuable. This payment strategy can potentially increase a wealthy person’s net worth modestly during his or her lifetime and increase the after-tax estate substantially after death. Premium financing also creates the flexibility to adjust the amount of leverage built into the life insurance policy when initially purchased and periodically over time.
The following case study show how premium financing can be an effective way to mitigate the cost of life insurance policy premiums.

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By |December 30th, 2013|Uncategorized|0 Comments

PRIVATE PLACEMENT  •  PREMIUM FINANCING  •  FOREIGN NATIONALS

Affluent investors care about what they keep, not what they earn. For over two decades, one of the best-kept secrets in tax planning has been private placement life insurance, which makes it possible for a hedge fund investor to garner tax-free returns. Private placement life insurance is a variable universal life insurance policy that provides cash value appreciation based on a segregated investment account combined with a life insurance benefit. Private placement life insurance is designed to maximize savings while minimizing the death benefit.

The below illustrates where private placement life insurance proved quite useful.

An affluent client sets up a non-grantor trust for the benefit of her children and funded it with a $5,000,000 gift. The trustee invested the gifted funds in hedge funds. Unfortunately the trust would have to pay taxes at a rate of almost 50% on the annual earnings because of the increased tax rates that came into effect in the U.S. on January 1st 2013 with the passing of The American Taxpayer Relief Act. Paying the high tax rates on the trust’s earning each year will significantly hamper the growth of the assets for the children. By investing the $5,000,000 into Private Placement Life Insurance, the trustee can still invest in hedge funds, received tax deferred growth on the underlying hedge fund earnings and provide a $20,000,000 tax free death benefit for the children.

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By |December 17th, 2013|Uncategorized|0 Comments

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By |December 16th, 2013|Uncategorized|0 Comments