Think About Tomorrow, Today

Phil and Mary, both 53 years old, have been married for 25 years and run a successful engineering firm, EQ Partners, which has grown to a market value of $22,000,000. They have 3 adult children, but none are involved in the business, with no considerations for them in the succession planning of the firm. Aside from their family and business, Phil and Mary are lovers of the arts and incorporate that passion into their travel, charitable donations, and community. Over the years, they have diversified their investments and own real estate valued at $8,000,000 as well as a securities portfolio valued at $5,000,000.

Like everyone, Phil and Mary have experienced market volatility in their retirement accounts and have concerns about the pressures a recession could put on their business. Phil and Mary decide to meet with their Financial Professional for guidance on how best to move forward in these economic times. They discuss with him how they are worried that it took decades to build EQ to where it is today and are hyper focused on tax savings. They want to make certain that if taxes were to increase, their assets wouldn’t be jeopardized or their business wouldn’t be subject to a fire sale for any liquidity needs.

During this meeting, their Financial Professional highlighted the importance of incorporating a protection plan alongside the growth plan they currently have for their investments and business. Accumulating wealth only has value if that wealth can be kept. For Phil and Mary, without planning, they would have a fast growing liability that would trigger at their death. Their estate would be subject to federal estate taxes if they were to pass away today. By age 75 and assuming their wealth grows by 6% annually, they could see wealth depletion at death of over $30,000,000. That news stunned them since they largely focused on income taxes over the years and ignored the 40% federal estate tax.

Because of the unique tax and solution characteristics of life insurance, their Financial Professional introduced a wealth protection plan with a $30,000,000 income tax-free death benefit second to die (or survivorship policy) with an irrevocable life insurance trust as the owner and beneficiary. With this structure and appropriate trust drafting, the death benefit would also be estate tax-free. Mary and Phil were intrigued by this concept but were concerned about liquidating their assets to fund the premium dollars.

Since funding is a key consideration in any wealth protection plan, the Financial Professional mentions to Mary and Phil that Oppenheimer has an Alliance with Southport Compass, on their platform, which specializes in insurance wealth plans and premium financing. This particular strategy would secure the needed $30,000,000 of protection while not having to liquidate any assets or take distributions from EQ to fund this life insurance policy. The lender that would provide the loan taken to cover the premiums would be secured by the life insurance cash value plus collateral, which is typically the marketable securities.

Their Financial Professional, with help from Hugo of Southport Compass, was able to create wealth stability in the income tax-free and estate tax-free asset class of life insurance, which provided Phil and Mary with the confidence that no matter what happens to them, their legacy for their children and EQ partners would be financially secured.