TFP Legacy Plan™ is designed on mathematical principles and core disciplines developed through decades of experience and research. In the last few years, a lot has changed in the world of estate planning, including increased interest rates, inflation, and taxation.
The TFP Legacy Plan™ addresses all variables and conditions through its proprietary design when borrowing funds from a third-party lender to pay all or some of the premiums for life insurance. Our clients benefit by utilizing the IRS code to mitigate estate taxes and reorganize their current assets to grow their current and future assets' ability to compound interest.
The TFP Legacy Plan™ continues to demonstrate its quality design and proven track record year after year during annual client reviews.
What is premium financing (PF)?
People have been borrowing money to create wealth since the 1700s. Premium financing involves borrowing funds from a third-party lender to pay some or all of the premiums for life insurance. It’s a method for funding large life insurance policies without liquidating capital to pay the premiums due. By borrowing the money to pay premiums, clients are able to keep existing assets invested in their portfolio, property, or business.
What are the benefits of premium financing?
Avoids the opportunity costs associated with paying for insurance premiums out of pocket. By using other people's money (borrowing from a lender) clients retain a significant amount of capital known as “retained capital”. This retained capital remains invested in their existing portfolio or business and can continue to grow without disruption to pay insurance premiums.
Provides the maximum death benefit and/or supplemental tax-free income stream with minimal up-front out-of-pocket costs. Creates large, tax-free pools of money that most high-net worth don’t have access to.
Reduces overall portfolio risk by reallocating assets from one pocket (that the client owns) to another pocket (that the client owns).
Offers a way to ensure adequate life insurance protection without relinquishing control of cash or other assets to pay premiums.
Allows clients to efficiently manage their annual gift exclusion and lifetime exemption and create generational wealth.
Why Should An Advisor Offer Clients PF?
To demonstrate advanced planning strategies to your best and most important clients.
To offer clients one solution to create a comprehensive death benefit and/or income benefit.
A formidable and proactive plan to cover long-term care costs.
To help your clients with one of the strongest tax mitigating strategies in the IRS code.
Who can benefit from premium financing?
Typical client profile: Age 25 to 70, net worth of $5MM or greater, and annual income of $250,000 ($2.5 NW and $250k income if age 50 or less). Business owners, key employees, high-net-worth individuals, and their adult children.
Individuals or business owners concerned about retirement planning, estate planning, business succession, key executive benefits, or charitable giving.
Those interested in the largest death benefit for the least outlay.
Anyone under age 70 who owns a substantial term policy or permanent insurance policy who would like to increase their death benefit, make it permanent, or substantially increase tax-free income.
Premium Financing:
What it is not!
-
It is not a way to find funds to pay premiums on a life insurance policy when the ability to pay such premiums does not otherwise exist.
-
It is not a simple transaction. It is a simple strategy.
-
It is not a strategy that reduces the cost of the life insurance policy.
-
It is not free life insurance coverage.
Case Examples
Male, Age 60
Physician
Death benefit for estate planning purposes.
$10,000,000 face amount, pays $50,000 for 10 years. No more expected out-of-pocket costs and will need to post collateral.
Female, Age 43
Entrepreneur
Wanted additional coverage and tax-free income.
Project plan is to turn $125,000 into $6,500,000 tax free income. $2,402,415 face amount, pays $25,000 for 5 years. Projected to generate $325,000 age 65 to 84.
Male, Age 63
Business Owner
Wanted retirement income and family protection.
Paying $45,000 for $7,500,000 of in-force term insurance, some of which expires within the next year. He pays the same amount out of pocket, posts collateral, generates $850,000 income from age 78 to 87 then family collects the remaining insurance upon his death.