How Advisors Are Leveraging Life Insurance to Solve These 15 Common Problems
In complex estate and business planning, there are many difficult situations that may arise. Life insurance can often be an integral part of the solution with the properly designed contract. Here are 15 common situations that can be made better with best-in-class wealth transfer strategies and designs.
LIFE INSURANCE SOLUTIONS
1
Problem: Funding large premiums with minimal gift tax expense
Solution:
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Non-equity split-dollar (second to die)
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IDIT sale of income producing assets
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AFR loans to ILIT
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Premium financing
2
Problem: Protection of personal liquid assets
Solution: Loan to ILIT to purchase high CSV product inside an ILIT
3
Problem: Protection of corporate liquid assets
Solution: Corporation enters into non-equity split-dollar agreement with ILIT using restricted collateral assignment
4
Problem: ILIT with outright distributions
Solution:
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Consider 1035 exchange
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Sell Policy from old ILIT to new ILIT
5
Problem: Second marriage with children from first marriage
Solution: ILIT for children; and revocable trust for surviving spouse
6
Problem: Young Athlete/entertainer wants retirement income and liability/divorce protection
Solution: High CSV life insurance inside an ILIT and non-equity split-dollar agreement between
self-settled trust and ILIT to fund premiums
7
Problem: Specified amount to children with balance to charity triggers estate taxes
Solution:
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Revocable trust - leave estate tax exemption to children in lifetime trusts with balance to charity;
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ILIT to fund balance for children
8
Problem: Family business with one child in the business and one who is not
Solution: Equalize with life insurance inside an ILIT
9
Problem: Business succession planning with key employees
Solution:
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Recapitalize company into voting/nonvoting shares;
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Sell some nonvoting shares to IDIT for employees;
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Create buy-sell funded with life insurance to fund remaining purchase at death
ESTATE PLANNING SOLUTIONS
10
Problem: Outright distributions to children; Mandatory income distributions to beneficiary (other
than marital trust)
Solution:
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Lifetime trusts which provide creditor, divorce and estate tax protection
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Discretionary distributions with beneficiary serving as trustee
11
Problem: Liability protection and discounting; S Corporation discounting
Solution:
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Family Limited Partnership (FLP) or Family Limited Liability Co. (FLLC)
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Recapitalize into 10% voting and 90% non-voting
12
Problem: Opportunity shifting
Solution: IDIT for spouse coupled with an ILIT for the benefit of the selling spouse
13
Problem: Concern about effect of wealth on children and/or grandchildren
Solution: Dynasty trust with incentive provisions
14
Problem: Multiple real estate investments
Solution: Multiple LLCs to compartmentalize risk
15
Problem: Client is general partner of existing FLP
Solution: Sell GP interest to irrevocable trust; retain ability to fire trustee
Why Advisors Choose TDC Life:
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