Savvy Wealthy Use Financed Life Insurance To Reduce Estate Taxes – and Take Advantage of Low Interest Rates

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A new study by Chief Executive Insurance Services reveals that many sophisticated CEOs and other high net worth individuals are using life insurance to reduce estate taxes and increase their charitable and inheritance transfers.

“One of my clients was able to get a $10 million life insurance policy for his family – and we got his payments down to only $18,000 per year for 10 years by utilizing low interest rate financing"

While the estate tax exclusion was recently raised to $5,250,000 per individual, business owners, CEOs and other high net worth individuals with estates above that level still need to plan accordingly to avoid having their heirs pay a 40% inheritance tax on amounts above the exclusion. Life insurance can be a potent tool in an estate plan because the insurance payout can be structured outside the estate. Many estate plans use Life Insurance Trusts to hold the policy so that the beneficiaries can retain the proceeds free of income and estate taxes.

This approach has been successfully used by many wealthy families for many years, but savvy high net worth individuals are taking this tactic to the next level and leveraging low interest rates by combining this tool with premium financing to purchase large life insurance policies ($10 million or more) with modest annual out of pocket premiums because part of the premiums are being financed by banks at historically low interest rates.

A new study by Chief Executive Insurance Services (an insurance agency that caters to the unique issues of CEOs and other high net worth individuals and works in conjunction with its clients accounting and legal advisors) demonstrates the effectiveness and leverage of this strategy. According to Chuck Goldman of Chief Executive Insurance Services “One of my clients, a healthy 52 year old business owner, was able to get a $10 million life insurance policy for his family – and we got his payments down to only $18,000 per year for 10 years by utilizing low interest rate financing from a bank; the policy should have enough value to pay its premiums beyond the 10 years and my client’s family can inherit a policy that can increase in value well beyond the $10 million coverage level if investment returns are in line with expectations.

For more information on this study and how these life insurance products can be structured for optimal value, call Chuck Goldman of Chief Executive Insurance Services at 1-800-813-4210.

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Wayne Cooper
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