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The number one use for FIT™ is providing for Estate Tax Liquidity. The differentiating factor and single biggest benefit of using FIT™ is its borrowing component. By utilizing a borrowing approach to fund the premiums and interest cost we effectively eliminate the need to make irrevocable gifts into the trust and thus free-up these funds to be used for other endeavors.
Estate Tax Liquidity
Creating additional income streams for retirement is obviously something that is desired by most people. However, the challenge of allocating money into an after-tax strategy is easier said than done. With FIT™ we can show clients (generally under the age of 50) how we can create a “tax-free” supplemental retirement income stream that requires zero dollars of out of pocket expense.
Estate equalization using life insurance is ideal for business owners who are trying to pass down their wealth equally to their children. For instance, a challenge presents itself when one or more of the recipients, has contributed more towards the building of that wealth compared to other siblings. Other times, a beneficiary might not be interested in taking part in the running of the family business or having a stake in the estate.
A life insurance policy is purchased to ensure that the estate is distributed equally while ensuring each member of the family is treated fairly. The members of the family with an interest in the estate get to inherit the family business, while the other members are bequeathed an equivalent value to the estate from the life insurance policy.
Distributing Family Assets Fairly and Equitably...
Funding a life insurance policy has long been a great planning tool. However, utilizing FIT™ and its cashless approach will have you and your client rethinking the attractiveness of this approach. Imagine funding/creating a College fund, supplemental retirement income, a death benefit for family members etc.