ADVANCED PLANNING CONCEPTS
This is an advanced financial strategy in which a client utilizes strategic borrowing to pay premiums for Investment Grade Life Insurance policies.
Client has a strong need for life insurance:
- Estate tax considerations• Family asset preservation & distribution planning
- Partnership Buyout & Stock Redemption considerations
- Interested in creating Charitable Legacy
- Is short on cash
- Is illiquid
- Cash is tied up in other assets
- Prefer not to liquidate or divert funds from profitable investments
- Client should have substantial assets (usually $3 million or more)
- An Irrevocable Life Insurance Trust (ILIT) is established
- Trust borrows to pay premiums with life insurance cash surrender value as collateral
- Within few years, cash value built up high enough to pay premiums annually without further borrowing
- At death, proceeds go to trust free of estate taxes - it pays off debt and remainder, as appropriate
- Loans are not considered gifts, resulting in gift tax savings
- Client retains flexibility to change plan as situation dictates
CHARITABLE REMAINDER ANNUITY TRUSTS & PRIVATE FAMILY FOUNDATIONS:
This is an ideal mechanism for selling appreciated property and/or creating significant cash flow, while simultaneously creating a legacy.
- Property - Stocks, Collections, Real Estate, Business Ownership
- Tax advantages - Avoid Capital Gains, and secure instant tax deduction
- Family Foundation is funded by invested portion of Trust
- Family or Donor's appointees sit on Board of Family Foundation
- Donor receives entire value of gift property over 5, 7 or 10 years through a stream of annuity payments
- Donor's family receives entire value of gift property from Wealth Replacement Trust funded by Annuity payments
CONSERVATION EASEMENTS & LAND TRUSTS:
An extremely valuable tool for those whose wealth is tied up in land. Pledge a portion of land holdings to perpetual Conservation Easement governed by a Land Trust. Conservation Easement usually results in a substantial tax deduction. Coordinated design strategies allow for creative usage of the land, or adjoining land, such as a Mini-Estate - Village development, Equestrian Centers, Bike Paths, Parks, Nature Centers, etc. This is an extremely valuable tool for golf club owners whose wealth is often illiquid, and subject to market cycles. Often parcels that are not necessarily core to the course's attractiveness and
value can be pledged for other functionalities. The net effect to an owner is tax advantages, enhanced cash flow and reducing estate tax bills. This is an especially valuable tool when the intent is to preserve the club for the next generation.