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Premium Finance

A Powerful and Tax-efficient strategy to Fund Large Life Insurance Premiums

Premium financing is ideal for clients who do not want to liquidate current investments to pay for premiums, for clients who want to retain their capital in their business or high yield assets and for those clients who understand the pros and cons of using leverage to achieve their financial objectives
 

  • Premium Finance

  • Private Premium Finance

Premium Finance

Premium financing aims to enhance the performance of individual or survivorship life insurance by borrowing the premiums, usually from a commercial lender.  Typically, the out-of-pocket cash flow is limited to the payment of annual interest. 

 

The policy cash value is used as collateral for the loan and may be a source of loan repayment.  As an alternative, at older ages the loan may be paid off at death from policy proceeds. The life insurance policy may be either death benefit oriented (for estate planning) or cash value oriented (for wealth accumulation).

Applicability

Premium Financing may be an appropriate funding strategy for clients who have a life insurance need and do not want to liquidate current investments to pay for premiums.  Typically, these clients are familiar with the pros and cons of using leverage to achieve their financial objectives.

Private Premium Finance

Targeting the same performance enhancements as commercial Premium Finance, this approach uses an estate included source of capital in place of a commercial lender. 

 

The borrower, an estate excluded trust, benefits from the relatively low Applicable Federal Rates (AFR).  Intra-family loans are a valuable alternative or supplement to gifting and are not subject to transfer taxes.

Applicability

Clients who want to provide the benefits of life insurance to a trust without using lifetime or annual gifts.

Reduce the Impact of Income Taxes.

Transfer Market Risk, Guarantee Outcomes, and Reduce Taxes.

Maximize Funds Transferred to Family or Charity.

Tax Advantaged Structures to Maximize Retirement Income.

Retain and Incentivize Key Employees to Protect the Future.

A Powerful and Tax-efficient strategy to Fund Large Life Insurance Premiums.

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