State-of-the-Art Life Insurance Planning for UHNW Clients

Speakers: Robert W. Finnegan

Year: 2017



The planning environment for ultra-high net worth clients is challenging. Most ultra-high net worth clients have already utilized their $5.45M ($10.9M) gift/estate and GST exemptions. Yet many of these clients are in need of significant additional planning including substantial additional life insurance. The mainstay of the estate planning bar, the sale of discounted assets to a defective grantor trust, has been hobbled by the new proposed §2704 regulations which, when finalized, will eliminate discounts with respect to family controlled entities.Economic benefit and loan regime split dollar remain among the most powerful wealth transfer vehicles available. With the recent favorable Estate of Morrissette case decided by the full tax court, generational split dollar* has burst on the scene. Although Morrissette eliminated a significant hurdle, it did not address the major issue: the value of the split dollar receivable in G1's estate or upon transfer during G1's lifetime. Aggressive uses of this important strategy are proliferating and the IRS is auditing every plan.*Note: With generational split dollar, G1 funds life insurance on G2 for the benefit of G3 and future generations. How do you navigate this complex environment to provide products and services that truly serve your clients and their families' best interests? This Ned Talk will demonstrate the power of split dollar and discuss its greater importance in light of the proposed §2704 regulations. It will focus on the use of economic benefit regime coupled with a sale to a defective grantor trust as well as illustrate the many options available with private financing (loan regime split dollar).The breakout session that follows will utilize the two split dollar regimes as the foundation for a deep dive into designing and presenting generational split dollar plans. If time permits, it will also provide an in-depth review of an example of the effect of the proposed §2704 regulations and the impact on life insurance planning.Objectives: At this Ned Talk, you will learn the difference between Economic Benefit and loan Regime split dollar plans (with practical examples of each), as well as when to use each. In the breakout session, we will do a deep dive into the aggressive uses of Generational Split Dollar, what the Estate of Morrissette did and did not hold, as well as how to responsibly design and recommend these plans to maximize benefits to family members while minimizing risks. KeyTakeaways: Understand how economic benefit regime, loan regime and generational split dollar can help you meet the needs of your ultra-high net worth clients.

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