Premium Financing

You have worked a lifetime to create your net worth....paid taxes, invested properly and made decisions to create an estate that has value.  Through time, IRS rulings change...  sometimes advantageous, mostly detrimental...especially to individuals with higher net worth!

Let's face it, the taxes imposed on estates are taxes that are additional to taxes that have already been collected on the money that created the estate in the first place.

There are many vehicles available to help individuals preserve their estate and pass on their legacy to future generations; minimizing Federal Estate Taxes.

Premium financing of insurance policies is one of those vehicles and has a proven past.  Premium financing allows the insured to assist in the preservation of their estate using life insurance;  minimizing the out of pocke expense to the estate for the costly annual premiums.

The age from 68 to 88 is the date range for these special category vehicles.

The Process

Premium financing has been around for fifty years to individuals with higher net worth...typically $2 million or more.  The intended use of the premium financed policy is to offset uncertain future estate taxes.  This process involves planning, time and client participation to prepare for submission of the application to the insurance carrier.

Let's look into the details...

The Details

• The prospective individual (you) must meet certain qualifying trequirements.

• Various financial institutions participate in premium financing.  The appropriate institution is determined based by your individual qualifications and needs.

• A simple application is submitted to the funding agency

• A quote will be provided by the selected financial institution

• An individual Life Insurance Trust (ILIT), is created to benefit the insured

• The application for insurance is submitted to the insurance carrier for approval

• Upon issuance, the policy is held in the ILIT

The Benefits

• There are vaious considerations when determining if this process is appropriate for your individual needs.  Let's look at the benefits of premium financing.

• The estate is protected against future unknown estate tax consequences

• Through premium financing, the insured is able to acquire proper insurance with minimal out of pocket expense to the estate.

• The policy is owned by the insured's ILIT (trust)

• The insured names the ILIT (trust) beneficiaries

• Future policy objectives can be adjusted by the insured to preserve the estate

Premium financing is just exactly that: a loan for a specified period of time that a funder will loan to the insured to pay the premium payments for a policy issued on the insured's life.  The loans are for a specified period of time.  These terms are generally from two to ten years depending on the funding instruction.  At the end of the loan term the insured has several options to explore.  We recommend that you explore these options diligently, focusing on your personal situation.

Options at Loan Maturity:

• Refinance the loan (extend the loan)

• Pay off the loan (continue to pay premiums individually)

• Settle the policy in secondary market (sell policy to a financial institution)
      commonly these settlements are in the neighborhood of 5% to 10% of the face of the policy...ie a $2 million policy could net you $200,000

Lee Zebold

Los Angeles – 213 977-0880  -  email:  lzebold@sbcglobal.net