Case Study Details


A retired CFO of a large, U.S.-based publicly traded pharmaceutical company had a strong desire to protect his financial legacy and preserve his family’s liquidity against unpredictable estate tax exposure. Complicating matters, he had exhausted his lifetime gift tax exemption.


He worked closely with his family’s estate planning attorney, wealth management planner and insurance advisors to develop a long-term liquidity solution – an irrevocable life insurance trust (ILIT) that held three life insurance policies. Since he had used up his gift tax exemption, if the ILIT were to self-fund the annual premiums from contributions he makes, each contribution would be subject to gift taxes. So, to mitigate future gift tax exposure, the team recommended a premium financing strategy to fund the annual premiums.


With the premium financing in place, the loan will accrue interest in order to cover any gift tax exposure on future contributions to the ILIT. Additionally, the net insurance death benefit will not be included in the gross taxable estate. This solution has the potential to save his heirs millions of dollars in future estate taxes.

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