The Leveraged Legacy Strategy™
The Leveraged Legacy StrategyTM is designed to acquire significant life insurance with lower out of pocket costs than traditional methods. Most of the time, the life insurance policy is owned inside of an Irrevocable Life Insurance Trust or Dynasty Trust for the purpose of holding the death benefit proceeds outside of a family’s taxable estate.
Estate and Legacy Plans may be designed to address multiple objectives, such as:
- Fund estate taxes
- Provide liquidity for the estate or business
- Equalize the estate among family members who have no desire to take an active role in a family business.
- Create a significant contribution to charity or religious organization
- Create significant assets outside of the taxable estate
- Protect against lawsuits and divorce
- Preserve and control family wealth for multiple generations
Unique Value Proposition
A unique value proposition is created when all or a portion of a life insurance policy is financed using Tennyson Capital Partners’ The Leveraged Legacy StrategyTM:
- We work with clients and their advisors to acquire large life insurance policies which may be owned outside of the taxable estate
- Out of pocket costs may be significantly less than a traditionally purchased life insurance policy. This may allow clients to lower their gifts to a trust to fund the policy, and potentially reduce or eliminate gift taxes.
- Financing may help to preserve lifetime exemptions
- Free up cash flow for other purpose
- Life insurance death benefits are paid income tax free to the trust
- The internal rate of return of the death benefit is typically much more attractive using financing
- Clients can be confident that their legacy is secure and use their other assets more freely
*This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified advisor.
Disclosure: Partial withdrawals and surrenders from life policies are generally taxed as ordinary income to the extent the withdrawal exceeds your investment in the contract, which is also called the "basis." In some situations, partial withdrawals during the first 15 policy years may result in taxable income prior to the recovery of the investment in the contract. Loans are generally not taxable if taken from a life insurance policy that is not a modified endowment contract (MEC). However, when cash values are used to repay a loan, the transaction is treated as a withdrawal and taxed accordingly. Unpaid interest on loans is added to the loan principal, thereby increasing the total debt on the policy. The combination of an increasing loan balance and deductions for contract charges and fees may cause the policy to lapse, triggering ordinary income tax on the outstanding loan balance to the extent it exceeds the cost basis in the policy. Loans, if not repaid, and withdrawals reduce the policy's death benefit and cash surrender value. Premium Financing involves certain lending risks including, but not limited to: change in interest rates, increased premium costs, market volatility, change in collateral valuation, margin calls, and termination, modification or non-renewal of the loan. These risks include the risk that life insurance protection will not be present at the time of the insured(s) death either because the lender has foreclosed on the policy or because the amount owed to the lender exceeds the insurance proceeds, in which case additional funds may be needed to repay the loan. If the policy is surrendered, the policy owner may be taxed on any policy gain even though the policy proceeds are paid to the collateral assignee. Material discussed herewith is meant for general illustration and/or information purposes only. Although the information has been gathered from sources believed to be reliable, please note that individual situations may vary. Neither SCF Securities, Inc. nor Tennyson Capital Partners LLC provides tax or legal advice. Please consult with a tax or legal professional for specific individual guidance. Premium Financing and Indexed Universal Life Insurance are not securities products.