Life Insurance Premium Financing Strategy
Life Insurance Premium Financing Strategy is a strategy used by many wealthy individuals and business owners to finance premiums for large life insurance policies for estate planning or business purposes. The strategy allows a high net-worth individual who has a need for permanent life insurance to borrow money from a third party lender to pay the insurance policy premiums rather than using their current cash flow or assets. Those high net worth individual utilizing this strategy understand both the power, and associated risks, of leverage. Depending on the way the arrangement was structured, the life insurance policy can be used as main collateral, or other forms of collateral might be used. Once the policy generates enough surplus cash value in later years, the owner of the policy can then pay back the premium finance loan from policy cash values. Life insurances are owned inside the Irrevocable Life Insurance Trust (ILIT), which must be done by the attorney whom specializes in Irrevocable Life Insurance Trust.
Premium financing can be an attractive and powerful option to the high net worth individuals who:
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