Advanced Planning Concepts using Life Insurance are designed to help individuals and families achieve their financial goals while also managing risk and protecting their assets. One of the most popular and effective tools in this area is Premium Finance. This strategy involves using a loan to pay the premium on a life insurance policy, which can be a more efficient and cost-effective way to obtain coverage.
Another advanced planning concept is the 162 Bonus, which is a tax-advantaged way to fund a life insurance policy. This strategy involves creating a bonus structure for key employees, which allows them to receive additional compensation in the form of life insurance coverage.
Estate Tax Planning is another important aspect of advanced life insurance planning. This strategy involves using life insurance to pay estate taxes, which can help preserve the value of an estate for future generations. With the help of a financial advisor, individuals can explore the different ways that life insurance can be used to achieve their financial goals and protect their assets.
Defined Benefit Plans are a type of retirement plan that provides a specific, guaranteed benefit to the employee upon retirement. The benefit is typically based on factors such as the employee’s salary and years of service. These plans are funded by the employer, and the investment risk and funding responsibility are assumed by the employer. They are designed to provide a steady stream of income for the employee during their retirement years. Defined benefit plans can be contrasted with defined contribution plans, such as 401(k)s, where the employee bears the investment risk and the benefits depend on the performance of the investment.
The Charitable Remainder Trust (CRT) is a trust that pays income to non-charitable beneficiaries for a specified number of years, after which the remaining assets pass to a charitable organization. CRTs can be used to provide a lifetime income stream to family members while also supporting a favorite charity.
Both CLTs and CRTs can be funded with life insurance, providing a way to leverage the death benefit to achieve philanthropic goals while also providing tax benefits and income for the beneficiaries. It’s important to consult with a professional advisor to explore the benefits and drawbacks of these strategies and to determine if they are suitable for you and your goals.
Premium finance insurance is a strategy that allows affluent clients to purchase life insurance policies using borrowed funds. This allows clients to make large premium payments without depleting their liquid assets. The borrowed funds are typically secured by the policy itself and are paid back over time, with interest. This can be a useful strategy for clients who want to purchase a large life insurance policy but do not have the cash on hand to pay the premiums. Additionally, it can also help them to diversify their portfolio and to obtain a higher death benefit for a lower premium cost. Premium finance can be used in conjunction with estate tax planning, business succession planning, and other advanced planning concepts to help affluent clients achieve their financial goals.