Premium-Finance Whole Life Insurance

1. Premium
Financed
Whole
Life
Insurance

2. Tradi6onal
Re6rement
Planning
IRA
401(k)
Capital
Gains
Estate
Taxes

3. Whole
Life
Insurance
ü
Benefits
for
Life
ü
Build
Wealth
($)
ü
Taxless
Pension!

4. Who
is
this
plan
for?
• Requirements:
• Generally
in
good
health
• >15
years
to
re6rement
• Interested
to:
1. Build
considerable
wealth
2. Provide
protec6on
for
family
3. Avoid
(or
defer)
selling
of
assets
4. Draw
pension
funds,
tax-­‐free!

5. Glossary
• Mutual
Life
Insurance
• 10-­‐Pay
Whole
Life
Policy
• Policy
Cash
Value
• Dividend
Payments
• Premium
Financing
• Interest
Arbitrage
• Triple
Tax
Advantage

6. Mutual
Life
Insurance
Dividends
paid
on
policy
cash
valueu
Policy
Holders
=
Shareholders
Year
Dividend
2011
6.85%
2012
6.95%
2013
6.65%
u
8.25%
average
the
past
40
years

7. Premium
Financing
u
Finance
premiums
with
a
bank
loan
u
Working
capital
&
assets
lea
intact
u
Interest
arbitrage
Loan
Rate
<
Dividends

8. Tax-­‐Free
Pension
Draw
1. Repay
outstanding
bank
loan
when
ready
to
switch
to
living
off
of
policy
1. Borrow
against
policy
value
– Not
taxed
(unlike
IRA
/
401k)
– Retain
policy
cash
benefits
Example:
Get
$5mm
policy
at
40
Draw
$200k/year
at
60
-­‐
tax
free
(loan)
-­‐
benefit
intact

9. Wealth
Accumula6on
Sample
Illustra6ons
for
a
$10MM
Policy
Start
Age
Re;re
Age
Interest
Payment
($k)
Cash
Value
($mm)
Loan
Balance
($mm)
Wealth
($mm)
Pension
($k)
IRR%
40
60
14
7.35
5.36
1.99
376
16.4
45
65
28
8.08
5.92
2.16
360
11.5
50
67
14
8.7
6.9
1.8
220
?

10. Frequently-­‐Asked
Ques6ons
• How
big
of
a
policy
can/should
I
get?
• How
quickly
do
I
build
posi6ve
equity?
• What
are
the
annual
interest
expenses?
• Should
each
spouse
get
her
own
policy?
• How
and
when
is
the
bank
loan
repaid?
• What
is
the
return
on
this
investment?
• What
are
the
risks
of
this
financed
plan?
• What
are
the
tax
constraints
of
this
plan?

11. Handling
the
Shoriall
• Pay
back
loan
faster
(discre6onary)
• Prepay
to
receive
premium
discount