OVERVIEW: Generate donations/gifts for nonprofit organizations, churches, synagogues and temples and/or transfer wealth to your loved ones without any out-of pocket premiums.
OPPORTUNITY #1
WHAT IS IT? Donate/gift to nonprofit organizations, churches, synagogues and temples AND take care of your loved ones.
HOW TO DO IT? Acquire a life insurance policy which you pay no premiums.
AGE REQUIRMENTS: 70 to 90 years old.
WHO PAYS FOR IT? The major bank pays your premiums and another major bank collects the premiums and manages your Irrevocable Life Insurance Trust.
WHO DOES IT? All the carriers are ‘A’ rated and higher. An ‘A’ rating and higher are the top 3 ratings of 15 ratings.
HOW MUCH IS DONATED? The donation is 10 to 12 % of the face value of a life insurance policy at issue.
WHAT DOES IT COST? You do not pay the premiums or pledge collateral.
WHEN IS THE DONATION? The donation is effective once the policy is enforced and the loan consummated.
HOW DOES IT WORK? The donation amount available to your organization decreases annually to between 8 to 10 % of the face value of the policy based at your life expectancy and to 4 % at age 100.
IMMEDIATE BENEFIT: The nonprofit organizations, churches, synagogues and temples receive an immediate donation to their cause when the insured is referred by them.
WHAT THE INURED IS RESPONSIBLE FOR:
· Taking a medical exam & evaluation which determines acceptability to the insurance carrier.
· Financial Statement which reflects a Net Worth of minimum of 2 million dollars, one million of which is other than home
· Unsecured Personal Guarantee for 25 % of the loan amount up to 5 years.
Note: The Unsecured Personal Guarantee can be replaced by a
cash deposit.
WHAT THE INURED IS NOT RESPONSIBLE FOR:
· Paying Premiums
· Paying Interest
· Pledging Collateral
DEFAULT CONDITIONS WHEN OR IF THE UNSECURED PERSONAL GUARANTEE WILL BE CALLED:
· The Insurance carrier goes bankrupt – highly improbable with the high rated companies we are utilizing. If an insurance carrier does go bankrupt, other carriers will purchase the assets of the defunct carriers and continue the business
· Cost of insurance increases – mitigated by non lapse guarantees which means Guaranteed Products
· Death of inured and the carrier contests the claim due to fraud. This is mitigated by insuring that all the information given by the applicant is accurate and correct.
· Note: The bank has loaned over 4 billion dollars of these type of loans and have not called any of them.
DISCUSSION OF DEAFULT CONDITONS:
· The bank is not interested in calling the guarantee because they will make more money from the death benefit by continuing to pay the premiums or sell the policy on the life settlement market.
· The carriers are the main thrust in requiring the guarantee as they require the insured to have some form of financial responsibility, i.e. Unsecured Personal Guarantee. Thus the insured has a recourse loan by virtue of the Unsecured Personal Guarantee. There is no free insurance.
· As you can see, the risks are minimal, the rewards are gratifying
DOWNSIDE TO THE INSURED:
· Once the insured has consummated this transaction, they have consumed all their capacity to get insurance, hence one cannot get any additional insurance.
DISCUSSION OF THE DOWNSIDE:
· Typically, if the insured has not utilized their capacity to obtain insurance by their 70’s, it is highly unlikely that they want or will need any further/additional insurance, except for charitable reasons.
· As you can see, the risks are minimal, the rewards are gratifying
EXAMPLE:
A person has a 3 million net worth.
They make application for life insurance and are approved for 3 million dollar face amount.
The ‘life expectancy’ is determined for the bank and a financial analysis is conducted to determine the feasibility of such a transaction. If feasible, the policy is put in place.
The insured’s choice of beneficiary will receive estimated 10 to 12 % of the face amount, approximately $360,000 at the issuance of the policy. This will slowly reduce to 8 to 10 % of the face amount, approximately $300,000 at life expectancy. It will eventually decrease to 4 % of the face amount, approximately $120,000 at age 100.
The insured’s share of the face amount can be donated to a non-profit organization or any non-profit religious organizations.
Note: The estimated share of the insured of the face amount is determined by the cost of insurance and life expectancy of the insured. The feasibility is determined by the ability to do arbitrage
between the cost of insurance and the profit the bank will make on the transaction. The numbers do the talking.
OPPORTUNITY # 2
Learn how you can give an appreciated piece of Real Estate to your favorite charity, receive a tax deduction and your heir may still receive the full value of the Real Estate value at your demise.
EXAMPLE: Donor purchased a piece of Real Estate years ago at $100,000 and it now has a fair market value (FMV) of $1,100,000. The donor gives to property to their favorite charity via a Charitable Remainder Trust and receive a tax deduction of the FMV. The Charitable Remainder Trust purchase a life insurance policy on the donor for FMV naming the donors selected beneficiary. Win-Win-Win
The donor WINS-the Charity Wins-the heirs receive full value of Real Estate via Charitable Remainder Trust.
Receive a complementary valuation if either of these program many work for you, your charity, and beneficiary by one of licensed Professional Financial Planners.
