Case Study Two was an “ask” for a minimum death benefit at projected mortality and bundling the servicing costs associated with the structure, (capitalize and finance the interest payable) and retire the structure from excess funds within the structure as soon as possible while keeping the death benefit viable (with enough liquidity to survive until mortality).
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 $107,330,761 in year 30 or age 79 (expected mortality) and a death benefit increasing year over year to $479,197,155 at age 100 found in Projected Death Benefit Net of Loan, Column 10.
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 8. Once the structure retires the bonds, year 17, column 4, the cash value or cash surrender value of the life insurance contract is available to support continued growth in the death benefit or, as Case Study Three demonstrates, is available as an income tax free loan to the owner.
The retirement of the debt associated with this design, found in Projected Policy Loans, column 4, line 17, varies by design but is the last entry in the column, is compressed in duration in order to satisfy the “ask” and to demonstrate the effects upon the accelerated debt retirement.
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.