Cash Value Life Insurance: Building a better Financial Safety Net


Peter R Moison, J.D. TEP, President

Helping people preserve, protect and enhance what they work so hard for means different things to different people. To us it means a customized and uniquely developed plan that (1) efficiently and simply covers as many bases as possible and (2) a team approach that capitalizes on the talents and knowledge of the successful client’s entire professional advisory team. There simply is no financial planning concept that can do more to help in this regard than the concept of cash value life insurance. The emphasis is on the concept of and not the product of life insurance. Products and concepts are very different things.

A product is a pre-packaged plan or arrangement. A concept is something that has the ability to solve planning issues but must be carefully developed into a plan of action. That plan, after it is accepted by the client, is then developed into a unique contract for the client. What is little known is life insurance is simply a contract. For that matter insurance of any kind is a contract. That contract does not have to be delivered in the form of a product. Rather it can and should be delivered in the form of a custom designed contract for the successful high net worth client. Only under such an arrangement can all the conceptual benefits of cash value insurance be made available to the client.

In simple terms a good and sound financial plan should cover at least the following bases:

· Provide replacement of income if the successful athlete dies too soon

· Accumulate a pot of money to replace lost earnings if the athletes career is cut short for reasons other than death

· Provide a pot of resources the athlete can rely on without a reduction in living standards when his or her career winds down

· Is efficient so that the best opportunity is there to help make the pot grow

· Is protected from adverse events

· Is private

· Is simple

· Is developed and managed by the right people

· A proper investment environment where investment decisions are made based on what makes financial sense and not clouded or affected by income tax issues

· And most of all is intended to work

There is only one financial concept that can take care of all these bases. That concept is cash value life insurance. Cash value life insurance not only provides tax free cash in the event of a premature death but in the more likely event the insured lives to enjoy the fruits of his or her labor will provide tax free cash, transition the estate both income and estate tax free, and provide the most highly efficient investment environment available. An investment environment where investment decisions are made that make investment sense and not tainted by income tax consequences. All of us have the responsibility to build and maintain our own financial security. If you concur then it only makes sense to take advantage of the tools and concepts that allow you to maximize the end result.

Most high net worth and successful people seek out the talents of professionals that are not only experienced in listening to the client but also highly knowledgeable and creative in helping the client successfully solve and plan for the client’s future. This includes a sound business plan, a financial plan, and an estate plan. None of those plans are implemented using prepackaged and mass marketed products. Those plans are carefully structured and designed based on the actual client wants, needs and the advice provided to the client. They are custom plans, each of which is unique to the client for which the plan was developed. The cash value life insurance plan should be developed in the same manner.

You do not use a commissioned sales agent to deliver a trust for estate planning, or to develop a business or financial plan. These plans are far too important and unique to be solved by essentially a one size fits all product. Rather such plans are solved by good listening and using the professional’s knowledge to develop a unique plan that is consistent with the client’s objectives. That is what Castle Re does. We worked with the client’s professional advisors to help develop the cash value life insurance plan the same way all the other components of the successful client’s planning are planned. And we do so in a manner that is not only consistent with what the client actually wants, but in a manner consistent with the advice provided to the client and in a manner that is highly cost efficient. Why do we work with the client’s professional advisors? Because the talents they provide are far too important to ignore and not utilize! The result is a truly customized life insurance contract or “CLIC” that fits the client.

So what are these real and useful benefits of cash value life insurance that should not go to waste and that only the concept of cash value life insurance can deliver? All the bullet points associated above with a sound financial plan are enhanced by the concept of cash value life insurance. Here are some more conceptual benefits cash value life insurance presents:

· Tax free death benefit

· No tax on the cash value

· Highly efficient investment platform where investment decisions are based on what makes financial sense. Since there is no income tax to worry about there is no tax tail wagging the investment dog

· Helps create the largest possible financial safety net resource

· Allows efficient and useful access to the accumulated wealth income tax free

· Private

· Can be designed to be creditor proof

· Can provide significant benefit to non U.S. persons who are considering moving to, buying property in, or earning money in the United States

· Can be designed to be compliant in several jurisdictions

· Transitions wealth completely income and estate tax free

· Can be efficiently coordinated with other estate or financial planning

· Maximizes the potential to build a safe, sound, useful, protected and secure short and long term financial plan

What makes Castle Re different and why can we do a better job?

· Founded by a tax attorney

· We do not sell life insurance policies

· We take a very different approach to the development of each insurance contract

· We help develop and implement custom life insurance contracts (CLICs)

· We work closely with the professional advisors to not only understand what is needed but also to educate and help the advisors to understand how to maximize the benefits for the client

· We also work closely with the advisors on the proper short and long term structure of the death benefit and how the same impacts, positively or negatively, the long term outcome of the CLIC

· All work is truly customized. Each contract is designed, drafted and implemented to be consistent with the objectives of the client and advise provided by the client’s professional advisors

· We understand the law and the tax rules and can help the professionals to understand how to maximize the benefits only the concept of cash value life insurance can provide

· We practice life insurance the same way we practiced law—listen, advise, listen again, design, structure, review, make necessary adjustments, obtain final approval, draft and implement

· No commissioned sales agents, no commissioned products

· We segregate the cash value of each contract into its own unique account that can only be used and accessed by the owner of the life insurance contract

· All investment management is independent

· Cash value is independently and discretionarily managed and can be managed by someone the client knows and trusts as long as the tax rules are respected

· All investment upside inures to the benefit of the custom contract of life insurance thus the benefit of the contract owner and the intended beneficiaries

· Even interest paid on cash value loans goes into the investment account

· Final contract is transparent and understandable with respect to costs and performance

· All costs are negotiated and guaranteed as part of the contract

· Castle does not impose surrender penalties

· We want a successful outcome and work hard to help achieve this goal

If you had two identical investment accounts—one which is currently taxable and one that is not taxable and is held by a CLIC—which account do you think would provide more benefits and have more value in the future?

Thank you