Legacy Planning

Legacy Planning

Legacy Planning

Legacy Planning

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THE PROBLEM

In 2012, a successful entrepreneur had recently purchased a $10 million life insurance policy to provide for his family upon death. However, because the opportunity cost of his available cash flow to invest exceeded 7%, his desire to reduce the cash outlay related to the policy premiums became the primary priority.

THE SOLUTION

His insurance advisor reached out to Wintrust Life Finance and together they structured a premium financing arrangement that would annually fund the ongoing premium. The initial structure was a five-year term with no fees and no pre-payment penalties, giving the client maximum flexibility. Over the years, the client extended the maturity of the loan twice.

In 2018 and 2019, as several of the client’s business investments provided additional liquidity, he was able to pay $515,000 toward the outstanding loan principal. Each year that Wintrust funded the annual premium, the client was able to reinvest his cash, giving him an additional $619,000 of earnings that would have been otherwise lost.

In May of 2020, the client passed away. The outstanding loan principal of $1.13 million was paid off through the death benefit proceeds and the remaining $8.86 million was passed on to his heirs.

THE VALUE OF PREMIUM FINANCE

In financing his premiums, the entrepreneur was able to maximize his earning potential, reduce his annual cash flow expense, and provide much needed death benefit protection for his family. During the loan, and at death, financing ultimately provided a greater rate of return.

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