The flexibility of low load insurance policies have made them an effective tool for financial planning, estate planning, and executive compensation packages. The absence of a sales commission means that death benefits are more generous and the growth of the investment portion is more rapid. The full disclosure of fees gives clients a better comfort level. The contract is more liquid than traditional policies placing more control in the hands of the client.
Building flexibility into the policy puts the client in the driver's seat, but does more as well. The financial planner has a better ability to design the policy to meet particular objectives. The policy design can emphasize death benefit efficiency versus cash value accumulation. The policy construction actualizes the implementation of specific strategies to achieve long term financial objectives.
Split dollar plans used in executive compensation packages are a good example. The contract can be adjusted to fund key employee contingency planning. There are inherent tax advantages that make this possible. This one example is used to illustrate the effectiveness of this product.
A split dollar plan can either be a collateral assignment arrangement or an endorsement arrangement. They are mostly used for highly paid executives but could be used for any type of employee. They have inherent qualities which make them particularly suitable. Mostly it is ability to adjust policy terms, allocation of premium between cash value and death benefit, low or no surrender fees and no or low sales commissions.
Under the endorsement arrangement, the employer is the owner of the policy and pays the premiums, but the employee can name the beneficiary. With the collateral assignment arrangement, the owner of the policy is the employee and the employer pays the policy premiums. The employee then assigns the policy to the employer to be used for collateral against the premium payments. Under another version of this arrangement, the employee assigns the death benefit to a trust. This works well for estate planning purposes.
Using split dollar strategies can be a powerful financial planning tool. It is a fine example of why these types of policies form an effective technique for estate planning. The investment part of the contract grows quickly when premiums are not being diverted by fees, commissions, and charges. As circumstances change in the clients life, the contract may be adjusted to change the balance of death benefit versus cash value. People appreciate the power to control an financial product.
There are other advantages that these policies have. There are no surrender charges. There can be tax advantages when policies are set up correctly. For instance, fees paid to a financial planner might be tax deductible. One should always get the advise of a professional about taxes first.
Low load insurance policies are useful tools for estate planing, money and financial management, and employee compensation strategies. The structure of the contract allows for flexibility of the policy design. The premium payments can be adjusted. The allocation of premiums between the investment portion and the death benefit can be modified. The flexibility allows a degree of customization that makes this a useful money management tool.
Building flexibility into the policy puts the client in the driver's seat, but does more as well. The financial planner has a better ability to design the policy to meet particular objectives. The policy design can emphasize death benefit efficiency versus cash value accumulation. The policy construction actualizes the implementation of specific strategies to achieve long term financial objectives.
Split dollar plans used in executive compensation packages are a good example. The contract can be adjusted to fund key employee contingency planning. There are inherent tax advantages that make this possible. This one example is used to illustrate the effectiveness of this product.
A split dollar plan can either be a collateral assignment arrangement or an endorsement arrangement. They are mostly used for highly paid executives but could be used for any type of employee. They have inherent qualities which make them particularly suitable. Mostly it is ability to adjust policy terms, allocation of premium between cash value and death benefit, low or no surrender fees and no or low sales commissions.
Under the endorsement arrangement, the employer is the owner of the policy and pays the premiums, but the employee can name the beneficiary. With the collateral assignment arrangement, the owner of the policy is the employee and the employer pays the policy premiums. The employee then assigns the policy to the employer to be used for collateral against the premium payments. Under another version of this arrangement, the employee assigns the death benefit to a trust. This works well for estate planning purposes.
Using split dollar strategies can be a powerful financial planning tool. It is a fine example of why these types of policies form an effective technique for estate planning. The investment part of the contract grows quickly when premiums are not being diverted by fees, commissions, and charges. As circumstances change in the clients life, the contract may be adjusted to change the balance of death benefit versus cash value. People appreciate the power to control an financial product.
There are other advantages that these policies have. There are no surrender charges. There can be tax advantages when policies are set up correctly. For instance, fees paid to a financial planner might be tax deductible. One should always get the advise of a professional about taxes first.
Low load insurance policies are useful tools for estate planing, money and financial management, and employee compensation strategies. The structure of the contract allows for flexibility of the policy design. The premium payments can be adjusted. The allocation of premiums between the investment portion and the death benefit can be modified. The flexibility allows a degree of customization that makes this a useful money management tool.
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