How Dr. Prosper Solved His Estate Tax Problem with Corporate-Owned Life Insurance and an Immediate Finance Arrangement (IFA)

The Tax Problem for Incorporated Professionals

Incorporated professionals like Dr. Prosper face significant tax challenges when accumulating wealth in their corporations (MPCs):?

These issues trap wealth inside the corporation, making it challenging to grow assets tax-efficiently or pass them on to heirs without significant losses to tax

Dr. Prosper’s Case Details

The Proposed Solution: Corporate-Owned Participating Whole Life Insurance

The team at Cardinal Life recommended a $3.5M Participating Whole Life Insurance Policy structured for High Early Cash Value to cover Dr. Prosper’s projected estate tax liabilities. Dr. Prosper’s MPC will be the owner and beneficiary of the policy.?

Key Components of the Strategy:

Comparing the Results

Dr. Prosper wanted to know how this strategy compared to his current approach of investing his surplus funds directly at an 8% return.? We compared the results of depositing $110,000 each year for 10 years into his portfolio vs. an IFA strategy.

By implementing the IFA strategy, Dr. Prosper’s estate receives an additional $2.5M to $3.5M in wealth.? Dr. Prosper achieved this significant increase to his legacy with less than $200,000 in total out-of-pocket costs over 10 years.

?Key Benefits of the IFA Strategy

1. Wealth Compounding: Funds grow in both investments and in the life insurance policy
2. Cost Effectiveness & Liquidity: The strategy uses leverage to reduce the out-of-pocket cost of a large insurance policy and doesn’t tie up capital
3. Tax Efficiency: Growth of the policy is not taxed and leverages the Capital Dividend Account for tax-free transfer of wealth to your heirs
4. Estate Liquidity: Provides a tax-effective and cash-flow friendly mechanism to pay estate taxes so your heirs don’t have to liquidate investments or properties to free up the needed cash

Conclusion

Dr. Prosper now has peace of mind knowing that his family will receive the full value of his estate without the burden of paying significant taxes.

If you’re an incorporated professional looking to maximize your legacy, let’s talk. The solutions we implement can protect your wealth and create a lasting impact for your heirs.

?Please reach out if you’d like to learn more about this strategy to see if it’s right for you!

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