One of the main reasons people buy life insurance is to secure a legacy. The death benefit bought gives the policyholder the ability to pass their assets to beneficiaries in the most tax-beneficial manner possible, which is a motivating factor to buy it. They want to secure a vast, robust legacy for their heirs. That’s where Legend FMS comes in.
Reasons to motivate high net-worth individuals to use insurance can be somewhat different. They include the will to protect their business and estate, tackle inheritance & wealth-related issues, or benefit from a more favorable tax scenario.
Individuals having large estates often waste small fortunes on federal estate and gift taxes. One of the typical estate planning strategies HNW individuals use is to buy life insurance policies in an ILIT, otherwise known as an Irrevocable Life Insurance Trust.
This approach removes trust assets from the grantor’s taxable estate, potentially protecting a significant percentage of the estate. Additionally, proceeds are not subjected to income or estate taxes if the life insurance policy is well-thought-out and professionally crafted.
Legend Financial Marketing Service is a field marketing organization based in Palm Beach Gardens, Florida, which offers professional help to independent financial advisors. They educate advisors about premium financing options principles, benefits, and risks.
Legend emphasizes that premium financing is one of the most helpful life insurance options, exclusive to high-net-worth individuals with amassed wealth exceeding 5 million.
“It can be an alternative method of funding life insurance premiums that involves borrowing the amount needed to pay the premiums from a lender instead of paying them out of pocket. The initial cost, then, becomes only the loan interest, which can reduce the total out-of-pocket cost of the plan.”
The core purpose of premium financing is to potentially minimize the total out-of-pocket costs for life insurance. Legend’s experts have also noted a scenario in which a HNW individual owns assets with poor liquidity or owns multiple businesses with limited cash flow. In such cases, borrowing insurance premiums from a third party can be the right possibility.
Though complicated, proper planning and execution allow clients to retain capital instead of parting with their assets to cover premium expenses.
A typical premium financing arrangement revolves around several key points. The trustee acquires a loan from a third-party lender, usually a commercial bank. A life insurance policy is purchased on the grantor’s life. Its cash value is used as collateral, but borrowers may have to supply added collateral.
After the loan is applied for and approved, the lender loans funds to the trust, which purchases the life insurance policy. The lender benefits from yearly interest while the loan is outstanding, making this design suitable for the client, the lender, and the insurance company.
If you are interested in learning more about this or other concepts, please visit the Legend FMS company’s official website.Media Contact
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