02/13/2025
A Smarter Approach to Estate Liquidity - A Client Success Story....
Successful business owners spend decades building their companies—but without proper planning, estate taxes can force their heirs to sell assets just to cover the bill.
Successful Client Outcome:
We recently worked with a couple in their early 50s, owners of multiple franchises. They had nine life insurance policies—a mix of Annual Renewable Term, Whole Life, and VUL—paying $47,000 annually for $3.7M in coverage.
They had a long-standing relationship with an advisor at a captive firm, who had structured their policies as a combination of life insurance and investment vehicles. At first glance, it seemed like the annual renewable term policies were in place to manage costs. But after reviewing the full portfolio, it became clear that cost savings weren’t the priority, as they were already paying $47K on a annual basis. Even worse, their annual renewable term policies were set to skyrocket in price as they aged, making their situation even more unsustainable.
With their net worth on the cusp of the $27M lifetime exemption, their sons would face a 40% estate tax on everything beyond that threshold. The old policies weren’t structured to provide the right solution.
How We Fixed It:
We redesigned their plan with a Survivorship (Second-to-Die) policy, ensuring their sons have the liquidity to cover estate taxes without selling parts of the business. Since neither spouse needed liquidity at the first passing, this strategy allowed for:
- 74% annual savings—cutting premiums from $47,000 (set to rise) to $16,000 (locked for life of the policies)
- 55 more years of guaranteed coverage—extending to age 121 (vs. old policies expiring at 75)
- Switching ART to Level Term for the next 20 years, preventing rising costs as well as hedging for the unexpected while either is still in their working years
- 20-Pay Structure—after 20 years, they’re done paying and the coverage remains guaranteed, unlike their previous full-pay policies that required lifelong premiums
This couple had never done an insurance audit and the 9 policies they had were not aligned with their updated goals.
We believe life insurance should be structured to accomplish either a need or a greed goal—but never both in one policy. By shifting their focus to a protection-based strategy, we secured their legacy, protected their sons, and eliminated unnecessary premium expenses.
Who Benefits from This Strategy?
- Business owners with estate tax exposure
- Families wanting to preserve assets for future generations
- Those with outdated policies needing restructuring for efficiency
Life insurance audits are crucial on an annual basis. Policies that were a great fit years ago may no longer align with your needs today. Whether it’s changing tax laws, premium increases, or evolving estate planning goals, a regular review ensures your coverage is working for you—not against you.
