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InKnowVision’s Monthly  HNW Webinar Series                Technical Webinar    ©2013. InKnowVision LLC. All rights reserve...
©2013. InKnowVision LLC. All rights reserved.www.inknowvision.com         P: 630-596-5090
InKnowVision.com Process Brochure Periodic Table Sample Plans     www.InKnowVision.com   All Content Copyright © 2013 I...
Agenda Benefits Business Owner Profile Case Study Formation Taxation Application     www.InKnowVision.com   All Cont...
Benefits Wealth accumulation Favorable tax treatment Minimize/reduce insurance costs Customize risk coverage Increase...
Profile Client Successful business or profession Has uninsured risk Has insured risk willing to self insure Gross reve...
Profile Client Developers General Contractors Subcontractors Manufacturers Professional Services Firms Franchisees ...
Case Study Manufacturing company (C Corp) $35M sales Operations in and out of the US 300 employees Net profit - $4.5M...
Captive Formed Captive formed Insurance coverage selected and written by captive Captive makes 831(b) election Premium...
Income Tax Year 1 Deduction to manufacturing company Saves approx. $400k in income tax Captive has no taxable income on...
Income Tax Year 2 Deduction to manufacturing company Saves approx. $400k in income tax Captive has some taxable income ...
Process - Qualification Financial qualification Risk assessment Cost - benefit analysis Decision to proceed or not    ...
Process - Implementation Engage manager Underwriting review and report Actuarial analysis and pricing of risk Risk cov...
Process - Time Evaluation and decision making: 2-6 weeks Implementation: 6-8 weeks    www.InKnowVision.com      All Cont...
Captive Insurance Companies Insurance company Formed to insure risk    Liability    Operating Risks    Business Risks...
Captive Jurisdictions                             Utah Nevis                             Nevada Anguilla              ...
Types of Captives Pure Captive – Single Family House    Risk reinsurance Cell Captive – Apartment Building    Less exp...
Types of Captives Single Parent Captive Group Captive    Homogeneous – same industry    Heterogeneous – multiple indus...
Types of Captives Foreign corporations taxed as US taxpayer Foreign corporation not taxed as US taxpayer    CFC’s and 5...
Capital Required Statutory Requirements    $125k         Cayman    $10k          Anguilla    $35k          Nevis    $...
Tax Issues Premium deductibility by US taxpayer    Ordinary and necessary    Real insurance – Helvering v. Le Gierse, 3...
Real Insurance Risk sharing (spread risk over a number of insured)    Harper Group v Commissioner (1991) 96 TC 45 – 30% ...
Reinsurance Pool                                  Company                                     1                       Comp...
Tax Issues Income to the captive If captive is a:     Foreign corporation and not a CFC – no US tax       But   4% exc...
953(d) Election Election by non-US company to be taxed as a US company    No excise tax on insurance premiums    Can ow...
953(d) Election Election to be treated as US company Waive all treaty benefits File US tax returns Disclose all shareh...
831(b) election For small insurance companies including captives Companies making the election can exclude up to $1.2M i...
Distributions from Captives Distributions are taxable when paid out from the captive (pure or cell)    Taxable as divide...
Planning Ideas Captives may be often owned by their parent Captives may have one or more owners Captives do not have to...
Planning Ideas                       Captive                       Clientwww.InKnowVision.com       All Content Copyright ...
Planning Ideaswww.InKnowVision.com   All Content Copyright © 2013 InKnowVision, LLC
Planning Ideas                Captive            Trust for      Underwriting profit passes gift         children/grand    ...
Planning Ideaswww.InKnowVision.com   All Content Copyright © 2013 InKnowVision, LLC
Planning Ideas                                Captive                       Client                    Trustwww.InKnowVisio...
Key Employees Have stock owned by key employees Can have vesting Buy out/redemption provisions Underwriting profits be...
Asset Protection Transfer for adequate consideration Fraudulent conveyance laws Ownership by trust     www.InKnowVision...
Costs Pure Captive    $80,000-$190,000 in year of formation    $72,000-$115,000 in subsequent years    Fee is also rel...
Questions or Comments?                                        Scott Hamilton, CEO                                         ...
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InKnowVision February 2013 HNW Technical PPT - Captive Insurance

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Scott Hamilton, CEO of InKnowVision, will discuss the use of captive insurance companies for estate planning, business tax planning, risk management and income tax benefits. All of these benefits can be substantial for the right company. As a CPA, attorney or financial advisor you will want to learn about captive insurance planning to help your clients reduce their tax liability, transfer more wealth out of their estate, manage risk, and much more.

This program is ideal for those who wish to reach the HNW market and those who have business clients with gross revenues of $10M and higher.

Veröffentlicht in: Wirtschaft & Finanzen
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InKnowVision February 2013 HNW Technical PPT - Captive Insurance

  1. 1. InKnowVision’s Monthly HNW Webinar Series Technical Webinar ©2013. InKnowVision LLC. All rights reserved. www.inknowvision.com
  2. 2. ©2013. InKnowVision LLC. All rights reserved.www.inknowvision.com P: 630-596-5090
  3. 3. InKnowVision.com Process Brochure Periodic Table Sample Plans www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  4. 4. Agenda Benefits Business Owner Profile Case Study Formation Taxation Application www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  5. 5. Benefits Wealth accumulation Favorable tax treatment Minimize/reduce insurance costs Customize risk coverage Increased cash flow Wealth preservation Asset protection www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  6. 6. Profile Client Successful business or profession Has uninsured risk Has insured risk willing to self insure Gross revenue - $10M or more Taxable income and free cash of at least $500k or more www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  7. 7. Profile Client Developers General Contractors Subcontractors Manufacturers Professional Services Firms Franchisees Restaurant / Hotel Chains Physician groups Hospitals www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  8. 8. Case Study Manufacturing company (C Corp) $35M sales Operations in and out of the US 300 employees Net profit - $4.5M annually Significant insurable risks Estimated premium to insure all risks totals $2M www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  9. 9. Captive Formed Captive formed Insurance coverage selected and written by captive Captive makes 831(b) election Premium paid $1.2M www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  10. 10. Income Tax Year 1 Deduction to manufacturing company Saves approx. $400k in income tax Captive has no taxable income on premium received www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  11. 11. Income Tax Year 2 Deduction to manufacturing company Saves approx. $400k in income tax Captive has some taxable income  Premium is non-taxable (if less than $1.2M)  Investment income on reinvested underwriting profit is taxable www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  12. 12. Process - Qualification Financial qualification Risk assessment Cost - benefit analysis Decision to proceed or not www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  13. 13. Process - Implementation Engage manager Underwriting review and report Actuarial analysis and pricing of risk Risk coverage selection Formation, capitalization and licensing Premium payment Policy issue www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  14. 14. Process - Time Evaluation and decision making: 2-6 weeks Implementation: 6-8 weeks www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  15. 15. Captive Insurance Companies Insurance company Formed to insure risk  Liability  Operating Risks  Business Risks  Exclusions  Deductibles www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  16. 16. Captive Jurisdictions  Utah Nevis  Nevada Anguilla  Vermont Bermuda  Kentucky  Delaware  District of Columbia www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  17. 17. Types of Captives Pure Captive – Single Family House  Risk reinsurance Cell Captive – Apartment Building  Less expensive  (Revenue Ruling 2008-8) Uses the 12 or more subsidiary safe harbor (Rev. Rul. 2002-90) www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  18. 18. Types of Captives Single Parent Captive Group Captive  Homogeneous – same industry  Heterogeneous – multiple industries www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  19. 19. Types of Captives Foreign corporations taxed as US taxpayer Foreign corporation not taxed as US taxpayer  CFC’s and 50% or more US shareholders  US Shareholder means at least 10% ownership  CFC’s and less than 50% US shareholders Domestic companies – US taxed www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  20. 20. Capital Required Statutory Requirements  $125k Cayman  $10k Anguilla  $35k Nevis  $250k Vermont and Delaware  $200k Nevada Other Requirements  Amount of coverages and premiums  History of claims www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  21. 21. Tax Issues Premium deductibility by US taxpayer  Ordinary and necessary  Real insurance – Helvering v. Le Gierse, 312 U.S. 531 (1941)  Risk distribution  Risk shifting www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  22. 22. Real Insurance Risk sharing (spread risk over a number of insured)  Harper Group v Commissioner (1991) 96 TC 45 – 30% OK  Rev. Rul. 2002-89 - less than 50% OK  Pooling – Reinsurance  Actual exposure to risk of loss Risk shifting – move the risk off of the balance sheet www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  23. 23. Reinsurance Pool Company 1 Company Company 9 2 Company Company 8 3 Reinsurance Pool Company Company 7 4 Company Company 6 5www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  24. 24. Tax Issues Income to the captive If captive is a:  Foreign corporation and not a CFC – no US tax  But 4% excise tax if writing domestic business  CFC or 953(d) company – US tax (unless 831(b) election)  Domestic company – US tax (unless 831(b) election) www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  25. 25. 953(d) Election Election by non-US company to be taxed as a US company  No excise tax on insurance premiums  Can own US real estate  Company files US tax return as if domestic company  Reduced filing requirements  Company must post LOC equal to 10% of gross income or have assets in the US equal to that amount www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  26. 26. 953(d) Election Election to be treated as US company Waive all treaty benefits File US tax returns Disclose all shareholders Name POA in US to receive notices Maintain an office in US Have assets in US equal to 10% of captive income www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  27. 27. 831(b) election For small insurance companies including captives Companies making the election can exclude up to $1.2M in net premium In lieu of reserve calculation requirement Must pay tax on investment income www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  28. 28. Distributions from Captives Distributions are taxable when paid out from the captive (pure or cell)  Taxable as dividends  May be a favorable rate  If company is sold in stock or stock redemption, then sale proceeds are taxed at capital gains rates www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  29. 29. Planning Ideas Captives may be often owned by their parent Captives may have one or more owners Captives do not have to be owned by a parent company www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  30. 30. Planning Ideas Captive Clientwww.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  31. 31. Planning Ideaswww.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  32. 32. Planning Ideas Captive Trust for Underwriting profit passes gift children/grand tax and GST tax free to trust children and its beneficiarieswww.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  33. 33. Planning Ideaswww.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  34. 34. Planning Ideas Captive Client Trustwww.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  35. 35. Key Employees Have stock owned by key employees Can have vesting Buy out/redemption provisions Underwriting profits benefit loyal and productive key employees www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  36. 36. Asset Protection Transfer for adequate consideration Fraudulent conveyance laws Ownership by trust www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  37. 37. Costs Pure Captive  $80,000-$190,000 in year of formation  $72,000-$115,000 in subsequent years  Fee is also related to premium (pool costs) www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC
  38. 38. Questions or Comments? Scott Hamilton, CEO InKnowVision, LLC www.inknowvision.com 630-596-5090 x80(630) 596-5090 www.InKnowVision.com All Content Copyright © 2013 InKnowVision, LLC

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