By Jon Kidd and Keith Owen

Are we truly facing the Great Recession?  Whatever the answer, countless charities that rely on donor support to fulfill their missions within the community are suffering from the slowdown in charitable giving.  This is a natural by-product of the current economic times.  According to Philanthropy.com, 52% of charitable organizations saw a drop in donations in the second quarter of 2009.  In addition to the present economic woes, it is also a fact that a history of philanthropic giving can take its toll over time, causing “donor fatigue” in donors of frequent and major gifts.  As a result, more creative strategies are becoming attractive to donors; for instance, many charitably-inclined individuals are donating life insurance policies to non-profit organizations. Alternatively, an individual may consent to charity-originated life insurance.

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By Jon Kidd

Key person insurance is an important component for small, medium-size and large businesses.  Key person insurance may be particularly important for medical practices, CPA firms, law practices and other professional corporations.

Businesses often depend on the expertise and talent of a small number of individuals for their success, as such, the death or disability of one of these key employees or executives may result in substantial economic damage or even the demise of the firm.  To avoid a negative financial impact, prudent companies acquire life insurance on key persons.   Due to the current economic landscape, cash-flow sensitive businesses are constantly looking for alternate methods of funding life insurance premiums.  Life insurance premium financing may be a way to leverage the insurable needs of corporations without dramatically impacting the businesses’ cashflow.

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Aventura News Jul.29-Aug.4 2009
By Jon Kidd and Keith Owen

Imagine you were informed that, thanks to a close relative, you had inherited millions of dollars worth of Coca Cola stock certificates that had been lost in the attic for decades.  Since this “negotiable instrument” belongs to you, would you climb up into the attic to get it and immediately enquire as to its value?

Forgotten or unrealized assets are surprisingly more common than people think.  Many families have not liquidated their bonds or stock certificates due to a lack of communication from generation to generation.  Life insurance premium financing creates a very similar scenario by tapping into an unrealized asset we call “insurable net worth”.  A life insurance policy is an asset just like a house or car.  You may qualify for a loan that pays the annual premiums, just like a mortgage or car loan, except the interest and payments may be accrued into the loan.  Interestingly, the policy value itself typically repays the loan for those of age 70 and over.

5 Common Questions

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Aventura News Dec.31-Jan.6
by Lynn Carroll

Looking for a way to balance your financial situation in the current economic environment?  “Consider life insurance premium financing,” says Jon Kidd, CEO of Banyan Life Financial.

The ideal client for this option, he says, is 70-plus years old, preferably with a minimum net worth of $1 million.

“Simply put, life insurance premium financing marries a life insurance policy to a loan. Life insurance can be purchased inside an Irrevocable Life Insurance Trust and paid for by a premium loan.  The insured clients are merely leveraging a hidden asset we call insurable capacity,”  Kidd explains.

“Despite the current credit crisis in the global markets, institutional lenders are increasingly deploying capital for life insurance financing as it is considered to be a long-term stable asset-class.”

Kidd comments, “Institutional banks and insurance carriers let clients use the policy as primary collateral as they understand that it is an asset with more value than the loan itself.  Loans against these policies yield competitive rates and terms. The interest can be accrued into the loan whereby you may even have the option not to make payments.”

The policies can significantly minimize inheritance tax obligations, making them ideal for older persons looking to pass on their assets.

“In the present financial climate,” Kidd explains, “a lot of people have lost between 20%-30% of their net worth. There may be no better way to balance out the situation than through premium financing.  Life insurance is known by many to be the number one means of augmenting wealth transfer from generation to generation.”

It is important for clients to understand that there is full transparency and approval for these products at the insurance carrier and regulatory levels.  Most CPA’s or attorneys who understand and review this transaction for a client will sign off on it.

Kidd remarks, “In cases where clients no longer need or want the life insurance, they can consider selling the policy, as it is just like any other personal asset. It is also a great way to enhance planned giving by donating your insurability to a charity or alma mater.”

For more information call Banyan Life Financial via (305) 695-8052, toll-free via 800-828-ESTATE (3782) or visit online at www.BanyanLife.com.