Asset Based Lending
Asset Based Life Insurance Financing is a strategy whereby a qualified borrower accesses third-party financing to pay for large life insurance premiums. Many of the world’s top insurance companies have constructed specific products for these financed plans to minimize outside collateral and maximize returns. This allows individuals and businesses to leverage current assets, minimize the need to pay out-of-pocket premiums, and do so most efficiently in a tax favored environment. This type of financing arrangement can be an attractive option to anyone who to generate future tax-free income and doesn’t want to use their existing capital to pay the premiums,
Why is Asset Based Life Insurance Financing such a valuable financial tool? In addition to the large death benefits, the retained capital from not having to liquidate other assets to pay after-tax insurance premiums can allow for additional investment opportunities and other more efficient uses of the capital. These arrangements have gained popularity in the high-end life insurance market because, if structured properly, all parties involved benefit. Borrowers benefit because they can use the KANBAN / Financial Engineering design to generate supplemental tax- free income at retirement. Lenders benefit because it gives them a favorably secured long-term loan interest income, and insurance carriers benefit because it continues to provide them with large premium flow.
Finally, Asset Based Life Insurance Financing programs can be structured to provide significant generational and estate planning benefits such as:
- Significant potential tax-favored cash flows in retirement for current and future generations
- Insulation from both business and personal creditors
- Estate tax-free death benefits