But for the immediate issue at hand, his need to borrow $125,000, I reminded him that a loan against his life insurance cash value
is not a loan of that cash value.
However, the ILIT sometimes causes a significant tradeoff; control over funds gifted to an ILIT is lost forever, and this loss of control extends to life insurance cash value
Insured Plan Uninsured Plan Annual Contribution 184,804 184,804 Funding Period to Age 65 to Age 65 Investment Fund 1,244,927 2,440,725 Life Insurance Cash Value
929,619 0 Total Account Value Age 65 2,174,546 2,440,725 Total Death Benefit Age 65 4,548,885 2,440,725 Lost Opportunity Cost on $2,826,369 0 218,271 Yearly Renewable Term Lost Opportunity Cost on Taxable Income 86,432 0 Estate Tax Age 65 (869,818) (976,290) Net to Heirs Age 65 3,679,067 1,464,435 Notes: * Assumes no minimum required distributions.
* Loans: Home mortgage, real estate, home equity line of credit, life insurance cash value
loan, 401 (k) loan, auto loan, student loan, and any other personal or investment loans except credit cards.
It shows how taxable mutual fund growth and tax-deferred life insurance cash value
growth affect the overall cost of the plan for a hypothetical plan year.
* life insurance cash value
plus accumulation annuity -- $60,000
Any irregular distribution of life insurance cash value
received on or after the annuity starting date is taxable once all investment in the contract has been recovered (FIFO rule).(15)
In certain policies, the interest rate on the withdrawal from the client's life insurance cash value
is lower than a typical bank loan.
A properly structured and funded buy-sell arrangement can offer access to life insurance cash value
to assist in buying out a business partner upon his or her death; access to an accelerated part of the death benefit may also help to facilitate a business owner buyout or cover other needs; or provide for periodic withdrawals after as few as 15 years, irrespective of the cash surrender value within the policy.
The life insurance cash value
portion of the portfolio represents a bond-like asset, based upon the life insurer's conservative portfolio of investments underpinning its long-term commitment to policyholders.
Exempt life insurance cash value
: The maximum life insurance cash surrender value a life insurance policyowner can exempt from creditor claims.
In the event there is no premature death and if the key employee stays with the business for the length of the Golden Handcuffs contract, then the life insurance cash value
may be accessed to provide a retention bonus.