Case Study Three was an ‘ask” for additional supplemental income beginning at an age 67 that maximizes the amount of the tax free distribution to the recipient. The death benefit and timing of the retirement of the structure were left for the APG team to optimize performance of the income stream.
The key takeaways on this design are as follows:
This non-modified endowment contract produces an estate tax free and income tax free death benefit of $47,449,068 in year 30 or age 79 (expected mortality) and a death benefit growing year over year to $170,962,872 at age 100 found in the Projected Death Benefit Net of Loan, Column 11.
Cash accumulation and therefore cash surrender value as first utilized by the liquidity provider (95% of actual value) to determine collateral requirements is found in Column 9. Once the structure has retired the bonds, year 17, Column 5, the cash value or cash surrender value of the life insurance contract is available as an income tax free loan to the recipient. In this design the cash value grew an additional zero years before lifetime tax free withdrawals of $3,000,000 per year (loans from the life insurance contract) begin.
The retirement of the debt associated with this design is extended in duration in order to optimize the internal growth within the life insurance contract.
This design illustrates two (2) bond issuances at year 1 and year 6, column 1 that are inclusive of all costs associated with servicing the life insurance policy.