ESTATE MAXIMIZATION

Case Study

Business owners Charlie (56) & brother Marcus (54)

$7.5M Net worth/ $400,000 annual income

Situation: Charlie, 56, and his brother Marcus, 54, are 50/50 owners of an equipment manufacturing firm which has been in the family for 35 years. The business now generates $6,000,000 in profits annually and both brothers have $6,000,000 in term life insurance that will expire by the time they reach 70 and 72. Back in 2006, they bought term life thinking it was the cheapest way to go – and in current cash flow terms it was at the time. The permanent products were 15 times more expensive – or so they thought. When we met with them, both of their parents were running strong at age 80 – a good indication that both Charlie and Marcus could very well live beyond age 80. Charlie also owned a $2,000,000 Variable Universal Life (VUL) policy which had performed poorly over the 15 years he had funded it – $160,000 in premiums and only $80,000 in cash value, during a period when S&P 500 saw a 70% increase. (Side Note – if you own a VUL – you own one of the most expensive life insurance chassis in the insurance market. Let us show you how transfer the risk back to the carrier and eliminate market corrections for good)

The business was valued at $25,000,000 and each had amassed about $4,000,000 in personal assets. From an estate perspective and a minimal projected corporate valuation growth of 2%, both of their estates would exceed the current estate tax exemption for married couples of just under $11,000,000.

Both brothers had a situation where roughly $20,000,000 of assets could be exposed to estate taxes. Current rates indicated a tax bill due of $8,000,000 upon the death of the last spouse. The decision was made to purchase $10,000,000 of life insurance on each brother – but there was a catch: Marcus had successfully undergone a quadruple by-pass and had an artificial heart valve implanted 8 years prior. Marcus was very healthy – all things considered, but basically was uninsurable. His wife Lauren, however, was insurable although suffering from an autoimmune nerve disorder.

Our analysis focused on developing the most cost-effective permanent insurance solution to minimize out-of-pocket costs while insuring they wouldn’t outlive their coverage. For Charlie, he was looking at over $650,000 in premiums to keep an inadequate amount of coverage through age 72; anything we designed he wanted to pay for in less than 15 years, eliminating insurance related expenses in his late 60s, 70s and 80s. As for Marcus, he chose to insure his wife Lauren to cover their estate tax exposure. The solution was to purchase two $10,000,000 equity indexed universal life policies and fund $1,200,000 of combined premiums using a loan from a regional bank in their area. The terms were 1.9% on a quarterly LIBOR chassis and the bank committed to a minimum of 7 years worth of premiums. All told, this premium finance structure cut their total out-of-pocket by more than 50% and helped them conserve cash flow for other interests. The solution protects both estates and in particular, protects each other from one of them “needing to sell” so heirs can pay estate taxes.

SMART LEVERAGE

Case Studies

Most high net worth business owners and entrepreneurs want to secure their wealth well into their retirement years. The business is their central focus and it must either produce income while they aren’t working or they must live off the proceeds after it’s sold. Either way, a lot is riding on the business because the business is the retirement plan. Future income needs are usually much greater than individuals ever expect – particularly those who’ve enjoyed significant income along the way, have a higher net worth and expect retirement to be entirely free of work. Our Smart Leverage^TM Solutions approach uses a commercial loan strategy combined with permanent life insurance to produce a pension-style income stream that assures continuation of existing lifestyle while also securing generational wealth.

Case Study – The Entrepreneurs

Business owners Kate (38) & Steve (37) (need a photo of him/her in corporate setting)

$2.7M Net Worth/$250,000 annual income

Desired outcome: life insurance coverage, retirement & disability income and estate protection

Kate and Steve are entrepreneurs who own several successful businesses and they were looking for an intelligent way to fund retirement. The traditional “throw money at the 401(K) and pray” just didn’t work for them. As Steve put it, “we chose the Smart Leverage^TM Retirement Plan because we were behind – we needed to catch-up on funding our retirement goals. This is just what we needed to jumpstart things – by accessing bank financing we have been able to dramatically catapult our retirement planning, build equity and establish two sizeable life insurance policies on us both – $3.5M on Kate and $5.5M on me. We’re entrepreneurs and this program lets us fund retirement while giving me the confidence to be aggressive at growing our businesses.” Kate went on to say, “Our retirement program is now on track regardless how our companies perform. Just like buying a house on short note, we will borrow around $2.2M and expense $40,000/year of interest for the next 15 years. When we turn 67, we project the tax-free income portion of our plan to be north of $150,000 per year through age 95. That’s 28 years of income which is equivalent to $7M before taxes! The future sale of our companies becomes icing on the cake. Try that with a 401(K)or IRA!”

RETIREMENT PLANNING

Case Study

Business owner Mark (53) & wife Carol (49) $7.5M Net worth/ $400,000 annual income

Desired outcome: Life insurance coverage and supplemental retirement income

Mark owns a successful, 7-year-old automobile dealership. He needed more life insurance for two reasons – he’s now a key man and critical to success of the venture and his net worth has ballooned since he first launched the business. As Mark puts it, “We started with nothing really, and now we generate $12,000,000/year in sales and heading to $30,000,000! I have a $1M term life policy personally, which is less than I want and I really need something for the business too. My concern is business cash flow -I want to keep that manageable. I’m also concerned about my personal cash flow in retirement – it looks like everything I will have will be taxable to some degree or another – either capital gains or income taxes since most of what I have saved is in our 401(K) and Carol’s IRA. I’m no fortuneteller, but my guess is taxes will be higher 15-30 years from now…it is now clear to us that a tax-free retirement income source is the planning opportunity we are missing. Turns out, financing the strategy was the most efficient way for us to go – it enabled us to get the most coverage and the biggest stream of retirement income possible. We killed three birds with one stone – the solution is cost effective, we got the life coverage we needed and we have the option to take out $185,000 tax-free each year beginning when I turn 69.”

RETIREMENT PLANNING

Case Study

Business owner Mark (53) & wife Carol (49) $7.5M Net worth/ $400,000 annual income

Desired outcome: Life insurance coverage and supplemental retirement income

Mark owns a successful, 7-year-old automobile dealership. He needed more life insurance for two reasons – he’s now a key man and critical to success of the venture and his net worth has ballooned since he first launched the business. As Mark puts it, “We started with nothing really, and now we generate $12,000,000/year in sales and heading to $30,000,000! I have a $1M term life policy personally, which is less than I want and I really need something for the business too. My concern is business cash flow -I want to keep that manageable. I’m also concerned about my personal cash flow in retirement – it looks like everything I will have will be taxable to some degree or another – either capital gains or income taxes since most of what I have saved is in our 401(K) and Carol’s IRA. I’m no fortuneteller, but my guess is taxes will be higher 15-30 years from now…it is now clear to us that a tax-free retirement income source is the planning opportunity we are missing. Turns out, financing the strategy was the most efficient way for us to go – it enabled us to get the most coverage and the biggest stream of retirement income possible. We killed three birds with one stone – the solution is cost effective, we got the life coverage we needed and we have the option to take out $185,000 tax-free each year beginning when I turn 69.”

SMART LEVERAGE

Case Studies

Most high net worth business owners and entrepreneurs want to secure their wealth well into their retirement years. The business is their central focus and it must either produce income while they aren’t working or they must live off the proceeds after it’s sold. Either way, a lot is riding on the business because the business is the retirement plan. Future income needs are usually much greater than individuals ever expect – particularly those who’ve enjoyed significant income along the way, have a higher net worth and expect retirement to be entirely free of work. Our Smart Leverage^TM Solutions approach uses a commercial loan strategy combined with permanent life insurance to produce a pension-style income stream that assures continuation of existing lifestyle while also securing generational wealth.

Case Study – The Entrepreneurs

Business owners Kate (38) & Steve (37) (need a photo of him/her in corporate setting)

$2.7M Net Worth/$250,000 annual income

Desired outcome: life insurance coverage, retirement & disability income and estate protection

Kate and Steve are entrepreneurs who own several successful businesses and they were looking for an intelligent way to fund retirement. The traditional “throw money at the 401(K) and pray” just didn’t work for them. As Steve put it, “we chose the Smart Leverage^TM Retirement Plan because we were behind – we needed to catch-up on funding our retirement goals. This is just what we needed to jumpstart things – by accessing bank financing we have been able to dramatically catapult our retirement planning, build equity and establish two sizeable life insurance policies on us both – $3.5M on Kate and $5.5M on me. We’re entrepreneurs and this program lets us fund retirement while giving me the confidence to be aggressive at growing our businesses.” Kate went on to say, “Our retirement program is now on track regardless how our companies perform. Just like buying a house on short note, we will borrow around $2.2M and expense $40,000/year of interest for the next 15 years. When we turn 67, we project the tax-free income portion of our plan to be north of $150,000 per year through age 95. That’s 28 years of income which is equivalent to $7M before taxes! The future sale of our companies becomes icing on the cake. Try that with a 401(K)or IRA!”

ESTATE MAXIMIZATION

Case Study

Business owners Charlie (56) & brother Marcus (54)

$7.5M Net worth/ $400,000 annual income

Situation: Charlie, 56, and his brother Marcus, 54, are 50/50 owners of an equipment manufacturing firm which has been in the family for 35 years. The business now generates $6,000,000 in profits annually and both brothers have $6,000,000 in term life insurance that will expire by the time they reach 70 and 72. Back in 2006, they bought term life thinking it was the cheapest way to go – and in current cash flow terms it was at the time. The permanent products were 15 times more expensive – or so they thought. When we met with them, both of their parents were running strong at age 80 – a good indication that both Charlie and Marcus could very well live beyond age 80. Charlie also owned a $2,000,000 Variable Universal Life (VUL) policy which had performed poorly over the 15 years he had funded it – $160,000 in premiums and only $80,000 in cash value, during a period when S&P 500 saw a 70% increase. (Side Note – if you own a VUL – you own one of the most expensive life insurance chassis in the insurance market. Let us show you how transfer the risk back to the carrier and eliminate market corrections for good)

The business was valued at $25,000,000 and each had amassed about $4,000,000 in personal assets. From an estate perspective and a minimal projected corporate valuation growth of 2%, both of their estates would exceed the current estate tax exemption for married couples of just under $11,000,000.

Both brothers had a situation where roughly $20,000,000 of assets could be exposed to estate taxes. Current rates indicated a tax bill due of $8,000,000 upon the death of the last spouse. The decision was made to purchase $10,000,000 of life insurance on each brother – but there was a catch: Marcus had successfully undergone a quadruple by-pass and had an artificial heart valve implanted 8 years prior. Marcus was very healthy – all things considered, but basically was uninsurable. His wife Lauren, however, was insurable although suffering from an autoimmune nerve disorder.

Our analysis focused on developing the most cost-effective permanent insurance solution to minimize out-of-pocket costs while insuring they wouldn’t outlive their coverage. For Charlie, he was looking at over $650,000 in premiums to keep an inadequate amount of coverage through age 72; anything we designed he wanted to pay for in less than 15 years, eliminating insurance related expenses in his late 60s, 70s and 80s. As for Marcus, he chose to insure his wife Lauren to cover their estate tax exposure. The solution was to purchase two $10,000,000 equity indexed universal life policies and fund $1,200,000 of combined premiums using a loan from a regional bank in their area. The terms were 1.9% on a quarterly LIBOR chassis and the bank committed to a minimum of 7 years worth of premiums. All told, this premium finance structure cut their total out-of-pocket by more than 50% and helped them conserve cash flow for other interests. The solution protects both estates and in particular, protects each other from one of them “needing to sell” so heirs can pay estate taxes.

SMART LEVERAGE

Case Studies

Most high net worth business owners and entrepreneurs want to secure their wealth well into their retirement years. The business is their central focus and it must either produce income while they aren’t working or they must live off the proceeds after it’s sold. Either way, a lot is riding on the business because the business is the retirement plan. Future income needs are usually much greater than individuals ever expect – particularly those who’ve enjoyed significant income along the way, have a higher net worth and expect retirement to be entirely free of work. Our Smart Leverage^TM Solutions approach uses a commercial loan strategy combined with permanent life insurance to produce a pension-style income stream that assures continuation of existing lifestyle while also securing generational wealth.

Case Study – The Entrepreneurs

Business owners Kate (38) & Steve (37) (need a photo of him/her in corporate setting)

$2.7M Net Worth/$250,000 annual income

Desired outcome: life insurance coverage, retirement & disability income and estate protection

Kate and Steve are entrepreneurs who own several successful businesses and they were looking for an intelligent way to fund retirement. The traditional “throw money at the 401(K) and pray” just didn’t work for them. As Steve put it, “we chose the Smart Leverage^TM Retirement Plan because we were behind – we needed to catch-up on funding our retirement goals. This is just what we needed to jumpstart things – by accessing bank financing we have been able to dramatically catapult our retirement planning, build equity and establish two sizeable life insurance policies on us both – $3.5M on Kate and $5.5M on me. We’re entrepreneurs and this program lets us fund retirement while giving me the confidence to be aggressive at growing our businesses.” Kate went on to say, “Our retirement program is now on track regardless how our companies perform. Just like buying a house on short note, we will borrow around $2.2M and expense $40,000/year of interest for the next 15 years. When we turn 67, we project the tax-free income portion of our plan to be north of $150,000 per year through age 95. That’s 28 years of income which is equivalent to $7M before taxes! The future sale of our companies becomes icing on the cake. Try that with a 401(K)or IRA!”

ESTATE MAXIMIZATION

Case Study

Business owners Charlie (56) & brother Marcus (54)

$7.5M Net worth/ $400,000 annual income

Situation: Charlie, 56, and his brother Marcus, 54, are 50/50 owners of an equipment manufacturing firm which has been in the family for 35 years. The business now generates $6,000,000 in profits annually and both brothers have $6,000,000 in term life insurance that will expire by the time they reach 70 and 72. Back in 2006, they bought term life thinking it was the cheapest way to go – and in current cash flow terms it was at the time. The permanent products were 15 times more expensive – or so they thought. When we met with them, both of their parents were running strong at age 80 – a good indication that both Charlie and Marcus could very well live beyond age 80. Charlie also owned a $2,000,000 Variable Universal Life (VUL) policy which had performed poorly over the 15 years he had funded it – $160,000 in premiums and only $80,000 in cash value, during a period when S&P 500 saw a 70% increase. (Side Note – if you own a VUL – you own one of the most expensive life insurance chassis in the insurance market. Let us show you how transfer the risk back to the carrier and eliminate market corrections for good)

The business was valued at $25,000,000 and each had amassed about $4,000,000 in personal assets. From an estate perspective and a minimal projected corporate valuation growth of 2%, both of their estates would exceed the current estate tax exemption for married couples of just under $11,000,000.

Both brothers had a situation where roughly $20,000,000 of assets could be exposed to estate taxes. Current rates indicated a tax bill due of $8,000,000 upon the death of the last spouse. The decision was made to purchase $10,000,000 of life insurance on each brother – but there was a catch: Marcus had successfully undergone a quadruple by-pass and had an artificial heart valve implanted 8 years prior. Marcus was very healthy – all things considered, but basically was uninsurable. His wife Lauren, however, was insurable although suffering from an autoimmune nerve disorder.

Our analysis focused on developing the most cost-effective permanent insurance solution to minimize out-of-pocket costs while insuring they wouldn’t outlive their coverage. For Charlie, he was looking at over $650,000 in premiums to keep an inadequate amount of coverage through age 72; anything we designed he wanted to pay for in less than 15 years, eliminating insurance related expenses in his late 60s, 70s and 80s. As for Marcus, he chose to insure his wife Lauren to cover their estate tax exposure. The solution was to purchase two $10,000,000 equity indexed universal life policies and fund $1,200,000 of combined premiums using a loan from a regional bank in their area. The terms were 1.9% on a quarterly LIBOR chassis and the bank committed to a minimum of 7 years worth of premiums. All told, this premium finance structure cut their total out-of-pocket by more than 50% and helped them conserve cash flow for other interests. The solution protects both estates and in particular, protects each other from one of them “needing to sell” so heirs can pay estate taxes.

RETIREMENT PLANNING

Case Study

Business owner Mark (53) & wife Carol (49) $7.5M Net worth/ $400,000 annual income

Desired outcome: Life insurance coverage and supplemental retirement income

Mark owns a successful, 7-year-old automobile dealership. He needed more life insurance for two reasons – he’s now a key man and critical to success of the venture and his net worth has ballooned since he first launched the business. As Mark puts it, “We started with nothing really, and now we generate $12,000,000/year in sales and heading to $30,000,000! I have a $1M term life policy personally, which is less than I want and I really need something for the business too. My concern is business cash flow -I want to keep that manageable. I’m also concerned about my personal cash flow in retirement – it looks like everything I will have will be taxable to some degree or another – either capital gains or income taxes since most of what I have saved is in our 401(K) and Carol’s IRA. I’m no fortuneteller, but my guess is taxes will be higher 15-30 years from now…it is now clear to us that a tax-free retirement income source is the planning opportunity we are missing. Turns out, financing the strategy was the most efficient way for us to go – it enabled us to get the most coverage and the biggest stream of retirement income possible. We killed three birds with one stone – the solution is cost effective, we got the life coverage we needed and we have the option to take out $185,000 tax-free each year beginning when I turn 69.”