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Privately Financed Graded Premium Universal Life

[ 0 ] February 5, 2014

Spectrum Financial Solutions, NJ, Life InsuranceCurrently, an arbitrage opportunity presents itself to sophisticated investors whereby interest bearing loans (interest paid currently and loans retired in less than ten years) made to a trust for the benefit of family members can create guaranteed Internal Rates of Return (IRR) that far exceed those available from most portfolio assets.  As the accompanying study illustrates, if trust assets grow at a modest 6% annual rate, the underlying trust will have grown terminal value to in excess of $16,145,000 in year 27 (the joint life expectancy of the hypothetical couple used in the study).

That equates to a 12.5% tax-free IRR for the trust assets (19.3% pre-tax).

This program is not a risk-less arbitrage.  Risk may be associated only with the trust’s ability to achieve annual growth of 6% during the loan period and longevity of the investors.  To the degree that growth rates fall below 6%, loans may be extended beyond 9 years and, correspondingly, IRR’s will not be as high as illustrated.  Additionally, because the trust matures upon the death of the investors, if the trust outlasts actuarial assumptions, IRR’s may be less than indicated above (see accompanying schedules).

This program is Internal Revenue Code (IRC) compliant.  Rates of interest charged to and paid by trusts using program are based on the Applicable Federal Rate (AFR) for mid-term loans and are published monthly.  Once established, loans will bear that AFR for the term of the loan.

Perhaps a successful individual is not interested in further estate planning. This approach understands that position and posits that the Privately Financed Guaranteed UL Program, aside from offering a superior investment experience, may enable investors’ unique opportunities to expand both charitable and non-charitable goals that previously weren’t possible or were deferred.

To Summarize:

Privately Financed Graded Premium Universal Life may be a solution to issues facing many successful investors and families today.  Through the use of a minimal risk arbitrage technique, estates can be secured, charitable gifts accelerated and a variety of other planning and/or investment goals satisfied very efficiently.

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