Use a Dual Security Plan to Help LLCs with Their Business Planning

A cash accumulation indexed universal life policy, such as our Income Advantage IUL, can be a great tool to help Limited Liability Companies (LLCs) with their business planning.

InsMark provides a Dual Security Buy-Sell Plan concept that you can use with your LLC clients. Here’s an overview of how the concept works:

1. The LLC purchases life insurance on the lives of key members with the business as the named beneficiary. Upon the death of an insured member, the life insurance provides a death benefit that the LLC can use to purchase the deceased’s ownership interest.
2. Upon the member’s retirement, when the policy is no longer needed for business purposes, the policy can also be transferred to the insured member via a K-1 distribution.* Once the insured member owns his own policy, he can name his own personal beneficiaries, and can also access the policy’s cash values to use as a supplemental retirement asset.

With this planning strategy, the LLC is allowed discriminatory participation as to the selection of the participants, and no regulatory approval is required. And, when structured properly, the death benefits will be received income-tax free.

Illustrating this Concept for Your Clients

Below is a sample InsMark ‘Dual Security Plan’ report that you can use to illustrate this concept to your LLC clients, along with the illustration for the Income Advantage IUL policy.

If you are a current InsMark subscriber, and you would like to run a Dual Security Plan illustration on your own, you will see the InsMark bridge icon when you run our Income Advantage IUL product in WinFlex Web. This bridge will take the data from our Income Advantage IUL illustration and use it within the InsMark sales concept reports. Simply select the ‘Dual Security Plan’ concept on the ‘Executive Benefits’ tab and it will guide you through the concept.

*The transfer must be done by way of a K-1 distribution which creates a supplemental retirement asset. If the LLC is taxed as a partnership as many are, the K-1 distribution may be tax free to the LLC Member.

Article Reference: InsMark Illustration Software.