Executives and Professionals earning high incomes face unique challenges in protecting their families. More often than not, the solution is beyond the scope of employer benefits and off-the-shelf products. High incomes limit truly desired participation in employer-sponsored savings vehicles leaving behind an insufficiently funded retirement plan. Group term life insurance policies seldom achieve the goal of providing current and future income protection for the executive’s family. Typical disability coverage is limited to an income that is well below a normal high income earner’s needs, and the thought of actually needing long term dependent care seems so far off into the future that most people disregard it and fail to realize the extreme cost of the care and the burden it places on their loved ones.
BEJS can provide certainty around these challenges with customized plans based around wholesale priced insurance products that fall outside of the traditional “one size fits all” mentality. These customized, yet practical, plans can provide tax-free supplemental retirement income; tax-free income protection in case of death; supplemental disability protection; and the assurance that today’s business executive will not be a burden on his/her estate and/or family in later years.
A successful partner in a professional firm needed a plan for protecting himself and his family from loss of income in the event of his death or disability.
BEJS facilitated a process that showed him how much his family would need in either event, helped him evaluate alternative solutions, and then implemented a laddered portfolio of term and permanent life insurance and a customized portfolio of disability insurance to fill the need.
As a result, the client is accumulating assets to fund a retirement income stream to support other strategies in place, has disability coverage in excess of $5 million, and is protecting his family from loss of his substantial income with portable coverage at the cost of 1% of his total income.
High Limit Disability Income
The partners in a large asset management firm were concerned about the impact of a disabling sickness or injury, which according to their buyout agreement triggered a buyout of the affected partner and loss to that partner of a significant future income stream.
BEJS worked with a specialty disability consultant and Lloyds of London to create an affordable solution that produces a very high monthly benefit followed by a $7.5 million lump sum payout after 24 months.
The firm partnership is now able to buy out a disabled partner with the peace of mind that a substantial after-tax income stream is provided for the partner and his/her family.
Supplemental Retirement Income
A highly compensated partner in a successful private equity firm realized he was unable to adequately save for his retirement using his 401(k) alone.
BEJS created a supplemental, tax-advantaged policy that allowed him to contribute over five times the amount he was limited to in his qualified plan. While the contributions were after-tax, growth in the policy was tax-deferred, and policy distributions were received tax-free. The partner could allocate values amongst a number of different asset classes and could re-allocate without paying taxes. In addition, the policy’s values were afforded creditor protection in the event of bankruptcy or some other unforeseen lawsuit. Finally, the policy’s death benefit was sufficient to complete much of his family’s retirement needs if he died before funding of the policy was complete.
The partner now has a portable, tax-advantaged vehicle in which to supplement his retirement savings that is not encumbered by qualified plan doctrine limiting the amount of his contributions and the timing of his distributions.
This material is intended for informational purposes only and should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney, tax advisor or plan provider.