Life Insurance For The Wealthy
Bob Lombardo
September 2017

It is well known that wealthy individuals and families can utilize the benefits of life insurance for estate planning purposes.  A good estate planning attorney can incorporate an array of trusts and utilize measures to minimize the estate tax and to reposition wealth to benefit family members, charities, etc.  What is not well known are the benefits of life insurance for those who are wealthy and feel they can self-insure utilizing their own assets.

How did the wealthy become wealthy?
We are all born with just two hands that can limit the amount of productivity we can accomplish with them.  However, we have the advantage of a brain that has no limitation as to its productivity.  The wealthy have figured this out and utilize their most productive asset to create and grow their wealth.

Most of the wealthy either grew their wealth and or maintained their wealth by utilizing smart and disciplined financial practices. The smart and most effective way to build wealth is to have your money work for you. The use of money to make money and the use of other entities’ money to make money is a basic premise of creating and growing wealth.

Life insurance and other insurance products can be an extension of this same principle.  Life insurance products are priced in such a way that the wealthy can take advantage of tremendous growth and protection of assets without risk and at pennies on the dollar.

How can life and other insurance products benefit the wealthy?
The following are just some of the ways by which life insurance can enhance and create even more wealth for the wealthy:

  • Use the benefits from life insurance to maintain or create a larger legacy.   After paying estate tax and other expenses upon death, life insurance can replace those lost assets.  In many cases the proceeds of life insurance can eliminate the need to sell assets under pressure and possibly at a loss.
  • Use of life insurance to offset losses due to market fluctuations.  Whether invested in securities, hedge funds, real estate or venture capital, a downturn in any of  these financial instruments can create large losses.  Life insurance can be put in place to replenish the estate.
  • Provide funds to a favorite charity.  Rather than bequeathing a portion of your estate to a charity, purchase life insurance that will be paid on your death to the charity.  Again helping maintain your estate and legacy.
  • Equalize inheritance when assets are primarily in a family business.  Provide children who are not involved in the business a sum equal to their portion of the business to free the ownership of the business to the children who are involved in the business.
  • Help young adult children or grandchildren create wealth and a tax free income stream with minimum death benefit cash rich permanent policies.  Example:  Pay $1,000 per month for a 33 year old son or grandson for 30 years.  At age 63 he can take out $75,000 per year until age 100 tax free.  The death benefit starts at $400,000 at age 33 and grows to $1,450,000 by age 63 (actual case).
  • Purchase a life policy with a long term care rider.  Using this vehicle, for a small amount of premium, there is a tax free death benefit and a long term care benefit in a single wrapper.  Sure, the wealthy can pay for care—but why should they deplete assets for this purpose when they can shift the risk on to the insurance carrier?  If they die and do not need care, the death benefit will increase the estate tax free and repay all the premiums.
  • Single premium long term care.  By repositioning an asset to this instrument, the long term care benefit will become a multiple of the original deposit. If death occurs before care is needed, the death benefit will return the original deposit plus an additional death benefit amount.  There is also a no-questions-asked return of premium feature.

The main premise here is that life insurance is a very good deal.  There are few, if any, financial instruments that will yield the amount of return of a well-designed life insurance portfolio.  The wealthy are well positioned to take advantage of these benefits.  With the counsel of a good estate planning attorney and insurance professional the wealthy can maximize their wealth and their legacy. 

Author's Bio
Bob Lombardo
has over 45 year's experience in both home office and field positions, starting his career as a home office life underwriter then transitioning to a field in house underwriter. Lombardo became associated and then principal of a well-known BGA for 30 years. After relocating to Southwest Florida, he opened Ash Brokerage of Southwest Florida, a branch sales and servicing office of Ash Brokerage, a national BGA. Lombardo is known for his underwriting expertise, case design and product utilization. He is a member of Risk Appraisal Forum and is active in Rotary and his community. Lombardo can be reached at Ash Brokerage of Southwest Florida, 3776 Cracker Way, Bonita Springs, FL 34134. Phone: 800-610-9810. Email: bob.lombardo@ashbrokerage.com.















Leave a Comment