Case Examples
Example 1
Jane Doe is a 74 year old widow in good health. Her wealth is primarily derived from real estate investment properties. Her financial advisor recommended $4,000,000 in life insurance to provide liquidity to pay estate taxes. Currently, Ms. Doe is "land rich and cash constrained". She has chosen to finance the annual premium using a personal guarantee for 100% of the loan obligation. Her existing ILIT is the Owner/Borrower.
- 74 year-old female
- Standard Non-smoked
- $4,000,000 face amount
- Loan Rate: Prime +1%
- 100% Secured PG
| Example Dates |
Year | Premium | Fees and Expenses |
Principal Balance |
Interest Rate |
Interest Amount |
Cash Surrender Value |
Death Benefit |
Pre- Payment Penalty (if appl.) |
Net Death Benefit Received |
|---|---|---|---|---|---|---|---|---|---|---|
| 4/30/08 | 1 | $327,690 | $20,644 | $348,334 | 6.250% | $22,406 | $35,664 | $4,000,000 | $7,415 | $3,629,260 |
| 4/30/09 | 2 | $0 | $0 | $370,740 | 6.250% | $23,847 | $68,801 | $4,000,000 | $7,653 | $3,605,413 |
| 4/30/10 | 3 | $145,640 | $1,483 | $495,457 | 5.750% | $29,252 | $104,367 | $4,000,000 | $10,202 | $3,475,291 |
| 4/30/11 | 4 | $145,640 | $1,983 | $643,079 | 5.750% | $37,967 | $142,549 | $4,000,000 | $13,241 | $3,318,953 |
| 4/30/12 | 5 | $145,640 | $2,572 | $791,292 | 6.000% | $48,805 | $183,531 | $4,000,000 | $16,314 | $3,159,903 |
| $2,648,902 | $162,277 | |||||||||
NOTE: This case study is for illustrative purposes only. It is provided for your information and is not intended to be considered a solicitation or offer. This illustration does not purport to contain all information an interested party may desire. Interested parties should conduct their own analysis and make an independent decision. All statements contained herein are for the purpose of marketing and promoting a concept. Each taxpayer should seek advice from their independent counsel.
Example 2
John Doe is a 72 year old. He has a need for $10 million in life insurance for wealth transfer purposes. He has sufficient financial assets to fund the premiums but does not wish to allocate those resources at the time of purchase, so he decides to fund the premiums using a 5 year Premium Finance Loan. The client experiences a decline in health and becomes uninsurable. He decides to keep financing the existing insurance policy through the 5 year duration of the loan. At the end of year 5, he pays off the loan and continues to pay premiums on his own.
- 72 year-old male
- Table B Non-Smoker
- $10,000,000 Face Amount
- Loan Rate: 7.55%
| Life Insurance Policy | Lending Structure | Client Benefit | |||||
|---|---|---|---|---|---|---|---|
| Age | Year | Death Benefit | Annual Premium |
Financed Fees |
Loan Interest Due |
EOY Loan & Collateral Posted |
Net Death Benefit |
| 72 | 1 | $10,000,000 | $586,463 | $207,776 | $61,961 | $856,200 | $9,143,800 |
| 73 | 2 | $10,000,000 | $586,463 | $5,000 | $112,937 | $1,560,601 | $8,439,399 |
| 74 | 3 | $10,000,000 | $586,463 | $5,000 | $167,890 | $2,319,954 | $7,680,046 |
| 75 | 4 | $10,000,000 | $586,463 | $5,000 | $227,130 | $3,138,547 | $6,861,453 |
| 76 | 5 | $10,000,000 | $586,463 | $5,000 | $290,991 | $4,021,001 | $5,978,999 |
| 77 | 6 | $10,000,000 | $586,463 | $5,000 | $359,835 | $4,972,298 | $5,027,702 |
| 78 | 7 | $10,000,000 | $586,463 | $5,000 | $434,049 | $5,997,810 | $4,002,190 |
| 79 | 8 | $10,000,000 | $586,463 | $5,000 | $514,052 | $7,103,326 | $2,896,674 |
| 80 | 9 | $10,000,000 | $586,463 | $5,000 | $600,298 | $8,295,086 | $1,704,914 |
| 81 | 10 | $10,000,000 | $586,463 | $5,000 | $693,271 | $9,579,820 | $420,180 |
NOTE: This case study is for illustrative purposes only. It is provided for your information and is not intended to be considered a solicitation or offer. This illustration does not purport to contain all information an interested party may desire. Interested parties should conduct their own analysis and make an independent decision. All statements contained herein are for the purpose of marketing and promoting a concept. Each taxpayer should seek advice from their independent counsel.