What sets us apart from any other Financial Advisers
September 25, 2021
THE CHALLENGE
Jacob started the family air conditioning business by himself when he was 35 years old and, in the last 25 years, the business had grown to 23 employees and was now the biggest air conditioning business in town. Jacob’s net income was $1,400,000 and his accountant projected out the business value at eight times earnings for a value of $11,200,000.
In total, Jacob figured he had $3,000,000 in assets plus the business for a total of $14,200,000. Jacob had lost his wife three years before to cancer and had his three children all working in the business. Joe wanted to be able to pass the business on to his children intact but was concerned by how much estate tax he would owe on the business and his other assets he had accumulated.
THE SOLUTION
Jacob met with his attorney who estimated his future estate tax liability at $1,200,000. He told Jacob that if he wanted to be able to pass his estate and business intact to his children, he recommended that he purchase life insurance to cover the current estate tax liability. He advised Jacob to purchase $1,200,000 of life insurance on his life and place it in an irrevocable life insurance trust to avoid it being taxed in his estate. While the attorney drafted his new will and insurance trust, Jacob talked to his insurance agent and had the trustee of his insurance trust apply for the $1,200,000 of an IUL insurance Jacob’s estate needed. Jacob was rated Standard Plus and his trustee purchased the policy.
Having an IUL policy in place to cover the tax liability allowed Jacob to pass his business to his children intact. The children did not have to worry about incurring hundreds of thousands of dollars of debt that the company would need to take on right at a time when their father passed away. This gave the business a better chance of survival and provided the children a business free of debt.
