Case Study A

(82yr old Female; Hybrid Financing; Policy + 25% Personal Guarantee as Collateral)
Client "Self Funds" Assumption
Total Face $10,000,000 
Premiums (Yr 1 + 2)  
 This item is "out of pocket" to the client -746,716
Interest/Earnings Utility Lost By Use of Own Capital
   This item is "out of pocket" to the client -70,938
 Rate:   9.50%
Trust Creation and Maintenance Fees  
This item is "out of pocket" to the client -20,000
Total two year cost of insurance ($837,654)
   
Out of pocket risk $837,654
   
Client Premium Finances Assumption
(Using Policy + Partial Personal Guarantee as Collateral)
Total Face $10,000,000 
Premiums (Yr 1 + 2)  
   This Amount is Financed -746,716
Interest (Yr 1)
   This item is accrued - Rate:  9.50% -70,938
Interest (Yr 2)
   This item is accrued - Rate:  9.50% -77,677
Fees (Trust Creation, Maintenance and Loan)
  This Amount is Financed -55,000
Total two year cost of insurance ($950,331)
   
Out of pocket risk (25% Personal Guarantee) $237,583  
 
(50yr old Male; Traditional (LIBOR based) Financing; Alternative Assets as Collateral)
Client "Self Funds" Assumption
Total Face $25,000,000
   Yearly Premium       299,227  
Premiums (Yr 1 + 2)  
 This item is "out of pocket" to the client (2,992,270)
Interest/Earnings Utility Lost By Use of Own Capital
   This item is "out of pocket" to the client (929,354)
(Yrs 1 - 10) Rate: 12%
Trust Creation and Maintenance Fees  
This item is "out of pocket" to the client (60,000)
Total ten year cost of insurance $3,981,624
   
Out of pocket risk $3,981,624
   
Client Premium Finances Assumption
(Using Policy + Partial Personal Guarantee as Collateral)
Total Face $25,000,000
   Yearly Premium       299,227  
Premiums (Yr 1 + 10)
   This Amount is Financed (2,992,270)
Interest (Yrs 1 - 10)  
   This item is "out of pocket" to the client (646,009)
      Rate 8%  
      LIBOR + 2% (fluctuates, caps may be bought)  
Fees (Trust Creation, Maintenance and Loan)  
   This item is "out of pocket" to the client (60,000)
Total ten year cost of insurance $3,698,279
   
Out of pocket risk (25% Personal Guarantee) $706,009 
 

Please note: These estimates are for illustration purposes only and all numbers are subject to revision and change. Please consult a financial professional before the purchase of any life insurance policy. Finance For Life does not provide tax advice. Please consult your tax professional to determine tax consequences, if any.

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