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.
The client and financial planner work together to design the structure of the policy. These policies have this flexibility built in to them. The ratio of cash value and death benefit can be adjusted at any time. A client's unique requirements can be met due to this flexibility. The policy can be adjusted as the client goes through the various stages of life and career.
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.
The two basic types of split dollar plans are the endorsement plan and the collateral assignment arrangement. These plans are established usually for highly paid executives. The lack of commissions, fees and charges make them attractive as a funding vehicle. The ability to adjust policy benefits and features is attractive to both clients and planners.
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.
The split dollar strategy is a good example of how these types of policy contracts are effective money management tools. With either a low or no sales commission, no fees and no surrender charges, the investment account portion of the contract accumulates more rapidly. This gives the policy owner a pool of savings that can be accessed if needed. The death benefit and investment portion can be adjusted according to the specific financial needs of the owner at that time in their life.
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 contracts can be a powerful tool in designing executive compensation packages, estate planning, and accumulating a nest egg. The ability to adjust the investment portion versus death benefit gives the client control over the effectiveness of the product. The client faces no surrender charges. It is an investment vehicle that is durable and long term.
The client and financial planner work together to design the structure of the policy. These policies have this flexibility built in to them. The ratio of cash value and death benefit can be adjusted at any time. A client's unique requirements can be met due to this flexibility. The policy can be adjusted as the client goes through the various stages of life and career.
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.
The two basic types of split dollar plans are the endorsement plan and the collateral assignment arrangement. These plans are established usually for highly paid executives. The lack of commissions, fees and charges make them attractive as a funding vehicle. The ability to adjust policy benefits and features is attractive to both clients and planners.
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.
The split dollar strategy is a good example of how these types of policy contracts are effective money management tools. With either a low or no sales commission, no fees and no surrender charges, the investment account portion of the contract accumulates more rapidly. This gives the policy owner a pool of savings that can be accessed if needed. The death benefit and investment portion can be adjusted according to the specific financial needs of the owner at that time in their life.
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 contracts can be a powerful tool in designing executive compensation packages, estate planning, and accumulating a nest egg. The ability to adjust the investment portion versus death benefit gives the client control over the effectiveness of the product. The client faces no surrender charges. It is an investment vehicle that is durable and long term.
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