Do you think estate tax planning is all about the client’s beneficiaries? THINK AGAIN!
Properly structured planning is client-centric, flexible and should be highly liquid. See how this design concurs servicing policy debt, transforms compound interest and turns it into simple interest. Let’s face the facts: many estate planning sales have stalled out because of the uncertain future of estate tax legislation. Today’s strategies need to move beyond tax planning and focus on the client.
Listen Up! Continuing to focus on tax and beneficiaries as the primary driver of estate planning is a failing strategy! It’s even more important to understand how to design client-centric strategies first, then address estate liquidity and wealth transfer secondly. It’s critical skill to master in today’s tax environment.
About the Client
Here’s a tale about a real estate developer and how a client centric approach takes the estate tax legislation off the table. Here’s the background on him:
- Male with preferred health.
- Age 57.
- Net worth: $50 million.
- Existing trust holds $8 million of producing real estate.
- Reoccurring income of $640k annually.
Here are the Issues He Faces
Entrepreneurs rarely view life insurance as a “good investment.” They trust their own ability to create income and accumulate wealth. More than likely, they often feel their beneficiaries will “have enough” and estate tax mitigation strategies are of little to no interest. However, they’re still actively involved in their business and feel they are “too young” to give it all away.
The Design
It’s all about showing the client a more effective way to do what he is already doing. In this case, use we’ll use the cash value life insurance owned by the trust and policy loans to provide funding for his real estate projects:
- 15-pay, utilizing a portion of the trust income to pay premiums.
- Illustrate loans every fifth policy year to fund new projects, including annual interest payments.
- Existing loans are repaid prior to the next loan being initiated.
What We’re Able to Do
This new design allows the real estate developer to:
- Effectively replace the bank, pay himself the interest that would normally go to the bank and maintain control over the terms of any future loans.
- Use participating loans to earn compound interest versus paying simple interest on the loan.
- Create ancillary benefits for his beneficiaries and liquidity to mitigate potential estate taxes.
Importance of Hedging Against Future Interest Rates
In this design, the product choice matters. A guaranteed rate on the participating loan creates a powerful way for the client to lock-in the cost of borrowing forever, and more importantly hedge against higher future interest rates.
Do you have a client with a sophisticated need? Call our team and we’ll help get you engaged with advance market specialists. There’s not a sales strategy to broad or too narrow for our team.
800.992.2642
DISCLOSURE
Securities and Advisory Services offered through Client One Securities, LLC Member FINRA/SIPC and an investment advisor. LLP Financial Services and Client One Securities, LLC are not affiliated.