Case Study - Income Planning

Charles Wharton, 43

Dr. Wharton, a solo dental practitioner, needs additional retirement income that he hopes will provide him with at least $200,000 per year for 20 years.

Leveraged Planning®

Dr. Wharton chose a high cash value universal life insurance policy as the best means for securing a steady tax-advantaged retirement income.

Dr. Wharton’s practice, an LLC, becomes the borrower of a Leveraged Planning solution commercial loan to fund the premiums for his life insurance policy. The use of a commercial loan allowed the practice to retain capital and provided an efficient source of premium funding. The owner and beneficiary of the policy was an irrevocable life insurance trust (ILIT) formed for Dr. Wharton.

Over the first five years, the LLC borrowed the required premium payments to fund the life insurance policy. The initial death benefit amount was $4,990,000 and the total loan amount was $1,000,000. Once the policy was fully funded, the LLC made simple interest payments monthly in the amount of $4,097 . The LLC elected to continue to make simple interest payments for the remainder of the loan term - or longer, depending upon Dr. Wharton’s planning needs. As an added benefit of the program, should Dr. Wharton pass away during the loan term, the death benefit could be used to repay the $1 million loan, and Dr. Wharton’s estate and heirs would receive the remaining proceeds (which were projected to remain over $2,000,000) .

The Leveraged Planning solution created by GFD for Dr. Wharton was designed to not only provide retirement income of $200,000 per year from age 65 to age 85, but also to provide for payoff from the policy’s cash value, one of several exit strategies available.