Risk & Business Magazine JGS Insurance Risk & Business Magazine Spring 2018 - Page 25

BY: JOHN E. MCENERY DIRECTOR COAST ADVISORS, LLC FINANCE AND BUSINESS CONSULTANTS Single-Premium Life: An Innovative Solution For Businesses Succession, Deferred Compensation, and Estate Planning A single-premium life insurance is exactly what it sounds like. You pay a one-time premium at the beginning of the contract and you never have to pay for it again. It may not sound all that different compared to other forms of life insurance, but if you take a deep dive below the surface, you will find all kinds of pleasant surprises. or variable options, which may include more aggressive selections, like mutual funds, which are volatile and have a risk of loss. ULTIMATE FLEXIBILITY • Versatile payout options. Beneficiaries can structure their policy payout according to their needs, from a single lump sum to a scheduled payout over a period of time. Single-premium life insurance is a great way for businesses with excellent cash flow or extra cash on their balance sheet to provide a great life insurance benefit to top employees without sacrificing the value of that liquidity. These are some additional benefits of single-premium policies. • GREAT EARNINGS POTENTIAL WIDE RANGE OF APPLICATIONS • Improved return on cash. If you are looking for an alternative to your bank’s low rate-of-return on cash accounts, consider this type of policy, which functions like cash but carries a large payoff when invested wisely and held long term. • Range of return options. Whether you are an experienced or novice investor, it’s easy to customize your portfolio to fit your individual risk tolerance level. For example, you can select from fixed options, like whole or universal, which are correlated to interest rates; indexed options, which are correlated to the S&P with a floor and a cap for lower volatility and which resets annually; • • • Collateral value. You can borrow up to 100 percent of the life insurance premium, pledging the policy’s cash surrender value as the primary collateral. Your out-of-pocket cost is the interest on the borrowed premium rather than on the actual premium. Succession planning. These types of policies can be used to help meet long-term business goals in cases where there are multiple owners, intrafamily succession goals, exit planning concerns, and Employee Stock Ownership Plans (ESOPs). Supplemental retirement planning. Single-payment policies are ideal in situations where a company wants to recognize key people that are critical to its success but who are ineligible to receive equity. This benefit can be used to incentivize employees based on performance and provide them with significant retirement benefits. Estate planning. Individuals and families with significant net worth and highly illiquid assets can benefit from this versatile cash equivalent in building a more balanced portfolio. FEWER TAXES AND PENALTIES • No surrender charge. Unlike many other insurance policies, there is no surrender penalty, which means you are free to terminate your policy early and cash it in for the value of your investments. • Tax-deferred investment. There are no taxes due on this type of policy until funds are withdrawn; because it accumulates tax free, its value can grow more quickly. Contact us today to view a few sample fact patterns that demonstrates the utility and flexibility of this creative product. + Disclaimer: These views are intended to provide an overview of succession issues. This article is intended to be for educational purposes only. Seek your own legal, accounting, and insurance advice before forming a succession plan. John E. McEnery, Esq. - Director Coast Advisors, LLC Finance and Business Consultants; Mr. McEnery has been an attorney and Senior Banking officer throughout his career. He spent 14 years with First Union/First Fidelity as Vice President commercial loans, he then became Senior Vice President with Fleet Boston Financial from 1997-2004. Jack has many contacts in the banking industry and has been instrumental in helping JGS Insurance create and grow our Financial Services Segment. 25