Terry Bork CLU ChFC, President   |   Aurum Insurance Services   |   D: 440-605-7230   |   C: 440-666-6032   |   tbork@auruminsurance.com   |   www.auruminsurance.com

The Multi-Generational Plan

Maximizing The Value Of Assets Over Multi-Generations

The case involves the following family unit.  Husband and wife age 77 and 75 (generation 1), with 5 adult children ages 45 to 52 (generation 2), and 9 grandchildren (generation 3).  Generation 1 had total assets in excess of 10m.  An Irrevocable Life insurance Trust was established to pay any future estate taxes and their assets dedicated to retirement where sufficient to fund their lifestyle objectives for life.

Generation 1 was interested in helping to provide for the current and future needs of generations 2 and 3, and were currently making lifetime gifts.  But, while they felt comfortable they had enough assets to fund their desired lifestyle, they were hesitant to give away too much for fear of needing it in the future.

Generation 1’s assets included real estate, business interests, and multiple investment portfolios.  They wanted to reduce the risk in their current holding, as well as reduce their income taxes.

The Solution

Generation 1 decided to reposition 1m of their assets, not required currently to provide retirement income, into Accumulation Designed Life Insurance (ADLI).

  • Five policies were acquired insuring the lives of each of their adult children (Generation 2)
  • Premium for each policy was $200,000 payable over 5 years
  • The policies were custom designed to address each family unit’s unique needs
  • The policies were owned by a Revocable Trust.  Generation 1 was trustee of the trust for their lifetime

The trust provisions provided Generation 1 with access to policy cash value if needed, as well as control of the ultimate disposition of policy cash value and death benefits for Generations 2 and 3.

The End Result

Generation 1 remained in complete control of each policy and their ultimate disposition.

Policy cash value growth was based on Equity indexing, a market hedging strategy.  It reduced risk over multi-generations with its ability to capture stock market gains without the risk of market losses.

Policy cash value growth was not subject to income taxes, providing an asset that eliminated income taxes over multi generations.

A majority of each policy's fees occurred in the first 10 years, providing an asset with a favorable fee structure over multi-generations.

The combination of advantages provided by ADLI increased the projected benefits to Generations 2 and 3 by as much as 30-40%!

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