Get Your Corporate Dollars Doing Double Duty

Owners of very successful private corporations are well aware of the importance of cash flow. Many are protective of how they allocate corporate capital so that business ventures are adequately funded and investment opportunities are not missed.

The Immediate Financing Arrangement offers an opportunity to provide life insurance coverage and accumulate wealth on a tax-advantaged basis without impairing corporate cash flow.

What is an Immediate Financing Arrangement (IFA)?

An IFA is a financial and estate planning strategy that:

• Combines permanent, cash value life insurance with a conservative leverage program allowing the dollars allocated to the life insurance premiums to do double duty by still being available for business and investment purposes;
• In the right circumstances and when structured properly so that all possible tax deductions are used, an improvement in cash flow could result.

Who should consider this strategy?

IFA`s are not for everyone. For those situations that best match the necessary criteria, however, significant results can be achieved. The best candidates for an IFA usually are:

• Successful, affluent individuals who are active investors or owners of thriving privately held corporations who require permanent life insurance protection;
• Of good health, non-smokers, and preferably under age 60;
• Enjoying a steady cash flow exceeding lifestyle requirements;
• Paying income tax at the highest rate and will continue to do so throughout their life.

How does it work?

• An individual or company purchases a cash value permanent life insurance policy and contributes allowable maximum premiums;
• The policy is assigned to a bank as collateral for a line of credit;
• The business or individual uses the loan advances to replace cash used for insurance purchase and re-invests in business operations or to make investments to produce income.  This is done annually;
• The borrower pays interest only and can borrow back the interest at year end;
• At the insured’s death the proceeds of the life insurance policy retire the outstanding line of credit with the balance going to the insured’s beneficiary;
• If corporately owned, up to the entire amount of the life insurance death benefit is available for Capital Dividend Account purposes.

Proper planning and execution is essential for the Immediate Financing Arrangement. However, if you fit the appropriate profile, you could benefit substantially from this strategy.

If you wish to investigate this strategy and whether it can be of benefit to you, please contact me and I would be happy to discuss this with you and/or your accountant.