There Might Be a Life Insurance Policy for That.
When it comes to estate planning for ultra-high-net-worth families, the challenges are often unique, layered, and far beyond the basics. Fortunately, creative life insurance solutions may offer tools to help address many of these issues. From advanced structures like Private Placement Life Insurance to premium financing and Infinite Banking, these approaches are worth exploring.
Here are six situations where planning fell short and how a creative life insurance solution could have helped prevent loss, stress, or regret.
Scenario 1: The Private Equity Trap
What Happened
A family had concentrated wealth in private equity. When the patriarch passed away, estate taxes were due, but the private investments were locked up. The family was forced to sell other assets quickly, including real estate, to cover the liability.
How Life Insurance Could Have Helped
Private Placement Life Insurance (PPLI) may have allowed the family to hold alternative investments inside an insurance wrapper. The policy’s death benefit could have provided tax-free liquidity to pay estate taxes. This approach may have preserved the core assets, giving heirs more flexibility in managing the estate.
Scenario 2: The Dynasty Trust That Ran Dry
What Happened
A family used valuation discounts to fund a dynasty trust with family limited partnership interests. However, they did not include enough liquid assets in the trust. When taxes and trust expenses came due, they had to liquidate a portion of the holdings, diminishing the long-term benefit.
How Life Insurance Could Have Helped
Life insurance placed inside the dynasty trust could have created a predictable and liquid source of funding. The death benefit might have supported future trust obligations and allowed the discounted assets to stay invested, aligning with the family’s long-term goals.
Scenario 3: The Business Expansion Block
What Happened
A family business owner wanted to expand operations and also protect the value of the company for his heirs. However, paying for a large life insurance policy up front would have disrupted capital allocation. The business stalled and the family postponed their planning.
How Life Insurance Could Have Helped
Premium financing could have covered the cost of a large insurance policy while preserving capital for business growth. The loan could have been repaid over time using policy cash value or proceeds at death. This may have allowed the family to protect their estate and grow their business at the same time.
Scenario 4: Real Estate, But No Leverage
What Happened
A real estate family wanted flexibility to jump on new opportunities. However, banks required significant documentation and collateral for lending. When a promising acquisition became available, the family missed the window due to lack of accessible capital.
How Life Insurance Could Have Helped
By using the Infinite Banking Concept with a properly structured whole life policy, the family could have borrowed against the policy’s cash value when needed. This strategy may have provided liquidity on their terms, allowing them to move quickly when the right opportunity came along.
Scenario 5: The Crypto Estate Audit
What Happened
An investor held a large amount of digital assets but passed away without a clear valuation method. The IRS questioned the reported values, leading to a drawn-out audit and substantial legal fees. The heirs had no clean path forward.
How Life Insurance Could Have Helped
By funding a life insurance policy with separate, liquid assets, the family may have covered future tax liabilities without relying on crypto values. For clients in this space, life insurance can offer a more straightforward and private transfer of wealth, avoiding valuation risk in volatile markets.
Scenario 6: The Philanthropic Shortfall
What Happened
A couple donated valuable artwork and collectibles to a museum. Their intention was noble, but after the donation, their remaining estate became difficult to divide fairly among their children. The heirs sold what was left, feeling disappointed and disconnected from the family’s legacy.
How Life Insurance Could Have Helped
A Charitable Remainder Trust, paired with an ILIT-funded life insurance policy, could have helped achieve both objectives. The trust would support the museum while the insurance policy might replace the donated value for the heirs, keeping the family and the charitable mission aligned.
Creative Life Insurance Solutions with Finley Davis
At Finley Davis, we recognize that with greater wealth comes greater complexity. And complexity often calls for more creative planning.
Life insurance, when structured thoughtfully, may help address many of the challenges that arise in advanced estate planning. Whether you’re navigating tax exposure, business succession, charitable intent, or multi-generational goals, creative life insurance solutions can offer flexibility and potential advantages that go beyond the basics.
For families with layered financial priorities and a desire to align planning with long-term vision, these strategies may offer meaningful options to explore. The right life insurance structure, coordinated with your legal and tax advisors, can become an important part of a more comprehensive plan.
If you’re unsure whether your current strategy accounts for these possibilities, now may be a good time to take a closer look. With the right team and a thoughtful process, your plan can reflect the full scope of your success and help prepare your legacy for what lies ahead.
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