HOW PREMIUM FINANCING WORKS
This is a transcript of a teleseminar hosted by well-known author and business consultant Jay Abraham, who was interviewing David Kandell, the President of Diverse Financial –
JAY: This is Jay Abraham and welcome to the call. Here’s the big picture. This whole call will take about ten minutes but can save you millions of dollars. I’ve created more than 8 billion dollars in wealth for my clients and I’m very selective about the companies I work with. I’m equally selective about the solutions I personally endorse. Today, you’ll hear about an amazing financial solution that has put me in a position not only to save millions of dollars, but to actually build and protect my wealth as well. In 40 years of creating wealth for people, I believe this to be the single most effective solution for protecting your assets from potential estate tax exposure and assuring your family that the lifestyle you create together will absolutely continue. I’m about to introduce you to David Kandell, the president of Diverse Financial and although I am a dedicated client of David’s, I have never written a check to his company. In fact, I will never write a check to David’s company; nor will you for this very effective solution. This is a very special teleconference because it is the first time I have ever limited a call to so few entrepreneurs. It means you have to qualify. It means you must have a provable net worth of at least five million dollars in assets to even take advantage of this.
I was talking to a friend of mine, Gary Bernstein; he’s a well-known celebrity photographer and he’s a very high net worth individual and successful businessman in his own right. So Gary asked me if I have life insurance and I say, “Of course I do.” And then he says “that covers you for your estate taxes and also provides continuing finances and lifestyle for your family?” and I said “Are you kidding? The premiums to cover that would be astronomical!” Then he says “I’ve got a friend who has insured me for all of that and the premiums are paid for by a third party.” Then he says, “Jay, do you know how much your estate tax exposure could be right now?” He says, “Uncle Sam can take up to 55% of your estate after whatever the deductions are.” So I say “Look, I’ve got a trust.” Gary says, “Yeah, that’s the first thing I said to my friend David when he asked me the same questions,” and then David said “Do you actually think just having a trust eliminates estate tax exposure?”
And on that note, it’s time for me to introduce you to David Kandell. Naturally, I’ve already asked David these questions. I’m asking them again now so you, my clients and friends, can take advantage of this, just as I did. David, are you there?
DAVID: I’m here Jay. You describe one of our solutions very well. Our company,Diverse Financial, offers many proprietary solutions, all designed for the high net worth individual. We actually did over 2 billion in insurance last year and we do everything in house, from trust creation to underwriting. Our licensed team of attorneys, CPA’s, and planners, provide our clients with every resource they need in one office. Every person on this call must have a CPA or other advisor, Jay, as we found out when talking to your own advisors. They were completely unaware of our ability to use third party financing to pay for the required insurance, the insurance everyone needs to protect their family and assets, and especially assets from estate tax exposure. So let’s start with a few facts about who we are. We’re a licensed financial services company and master insurance agency. We’re appointed with over 120 of the highest rated insurance carriers in the world. We also have long standing relationships with many of the largest banks and financial institutions in North America. The key to all of this is that we have married the carriers and the lenders and created a highly specialized solution for the wealthy, and very important, all of our third party financing is carrier approved, meaning that this type of life insurance is designed to be financed and is State approved by the department of insurance. Jay, when we first spoke, you, like many, thought that this was too good to be true. As you now know, we’re in a position to provide one of the few legal win-wins left in the world.
JAY: David, now wait a minute. Explain to everybody why banks are even interested in financing life insurance policies for high net worth individuals.
DAVID: That’s simple Jay. It’s the most valuable asset in their portfolio. It’s not a matter of IF the asset will pay off, it’s only a matter of when. Everyone dies at some point. It’s important to remember that universal and whole life policies always pay off. Term policies don’t. In fact, more than 90% of term insurance lapses or gets cancelled because the insured outlives the coverage.
JAY: David, tell them what you told me about estate taxes and protecting our families.
DAVID: Life insurance is the only real solution because, when it’s set up correctly in a trust, the death benefits pass tax free and those funds can be used, for among other things, to pay off estate tax liabilities. But it has to be structured correctly. Your solution was very different from Gary’s. This is a personalized service and customized solution. No “one size fits all.” Jay, this is just the overview you wanted for your clients.
JAY: Understood David, but let’s talk now, let’s move and talk a little about trusts, ok?
DAVID: Sure. Having a trust does not eliminate estate tax exposure unless you plan on giving away all of your money to charity. There’s more than 30 different kinds of trusts.Do you have the correct kind of trust to meet your current needs? But the biggest problem is, that even if you have a trust, it’s probably never been reviewed or updated.
JAY: Meaning what, David?
DAVID: Have their been any changes in the family dynamics? Marriages, divorces, children, new grandchildren? New stocks and real estate deals since the trust was created?
Jay, in your case, you hadn’t looked at the trust in 20 years!
JAY: Yeah, that’s true. I also had ten million in life insurance that I found out was near to worthless. So, David, tell us all how you use third party financing to protect an estate.
DAVID: Let’s assume that a 60 year old has assets in excess of five million and qualifies for five million in life insurance. Let’s also assume that his annual premium is about a hundred thousand. If he lives for thirty more years, he’ll pay about three million in premiums. But if a third party paid the premiums, he just saved three million dollars and can use it to build more wealth. In this example, the lender could structure a 15 year loan for 15 years at a hundred thousand a year, the premiums paid would be about 1.5 million. The lender will also add interest to the loan. So let’s say the interest is approximately a million dollars over the 15 years. So the five million dollar policy is actually written with a death benefit of 7.5 million. 5 million for the beneficiaries and 2 1/2 million for the lender. But, most importantly, it’s owned by your trust. The loan will be re-paid from the growth in the cash accumulation account or from the death benefit; and upon death, the five million is paid out to the beneficiary’s trust with no tax consequences. Remember, the premiums were all paid by a third party, not you. Like I said, it’s the ultimate legal win-win. Plus, this life insurance builds wealth. It develops cash value and becomes an asset of your estate. You can even borrow against it.
JAY: David, tell them now about your client, the one who had to liquidate estate assets because of the IRS problem.
DAVID: Here’s a terrible story and some advice. Unless you’re planning to die this year in 2010, when there is no estate tax due; based on pending legislation, it looks like the 2009 estate tax exemption of 3 1/2 million is going to be lowered to somewhere between 1 and 1 1/2 million per individual after 2010. So hold that thought and listen to this story. A friend of my parents passed away about five years ago and then his wife passed away in 2008. The two kids had absolutely no idea what was going on with the family estate. Their son, Steve, called me after his mom’s death. He had a problem. The taxable assets in the estate were ten million. The allowable exemptions were four million, leaving a 6 million dollar potential estate tax balance. For those of you who don’t know this, the IRS can absolutely take up to 55% of your assets after exemptions. That’s over three million in estate taxes due, and you have to know that the IRS will not release the assets until the taxes due are paid. So here’s Steve’s problem. Out of the ten million in assets, only one million was liquid, the rest was in real estate. The IRS had forced the liquidation of the parent’s home to pay the three million in taxes. The house had an original value of 6 1/2 to 7 million. The IRS wound up selling the house for 4 1/2 million in what I call a fire sale. So, out of the ten million, the kids and grandkids ended up with under five. That’s less than 1/2 the estate. You may think the kids ended up with a lot in listening to this story but, if it was your money, or your house, would you be satisfied losing half? Think about this. He, like many of you, worked his entire life, for what? What was his goal? He did it to build assets and an estate; something for retirement; something for his family; something to continue his legacy. He wanted his family to continue in the same lifestyle that he built and enjoyed with them for the last 20 years. Look at the end result. Look what happened. It’s preventable. Don’t let it happen to you.
JAY: Let me say something here David. If we hadn’t met, this could have been my story too. So let’s end this with one last case, and it’s a sad one but it’s a gripping one. Tell them the sad story about Rose.
DAVID: Ok. I have a 72 year old client named Rose. She’s a widow who lives with her daughter and her two grandchildren. Now, she says she’s worth about ten million. I just want you to know that Diverse Financial did not create her original trust or estate plan,which was created over ten years ago. So, about three months ago, Rose asked me to review her estate. As it turns out, she’s actually worth over 14 million. That’s great news, but it also created an additional 4 million in potential estate tax exposure. So Rose applied for a new life insurance policy with us for about four million to cover any potential estate tax exposure. We actually got her a preferred rating from two different carriers. So far, we’re all great. I had an appointment to see Rose last Friday to finalize the insurance. On Wednesday evening, her daughter called. Rose had a heart attack.She’s ok but she’s no longer insurable. The finance life insurance solution can not be used. You know, your health and your family are your two greatest assets. They’re sometimes repairable, but they’re not replaceable. Who knows what tomorrow will bring? This is reality, you need to do something about it.
JAY: So David, let’s talk now briefly about insurability and age because I think there are a lot of misconceptions out there.
DAVID: Yeah, this is a very important issue. We recently insured an 82 year old gentleman and got him a preferred rating. We’ve been able to get life insurance for many people who have been turned down in the past; turned down because they were diabetic or they had some kind of heart conditions. Insurance company criteria changes. If you’re 25 or 85, we can build and protect your wealth. Life insurance provides many living benefits. The younger you are, the faster your assets will grow.
JAY: So, David, what if you’re not worth five million. Can you help someone in that position.
DAVID: Absolutely, we have safe, guaranteed products that the retail banks can’t even come close to, with no chance of loss. Products that’ll build your wealth, even if you’re not worth five million and you’re only 25 years old.
JAY: David, I think it’s very very important. So, in conclusion, how do my clients and friends contact you?
DAVID: The easiest way is to give us a call between 9 am and 5 pm. What we’ll do is send you out a form, absolutely at no cost to you so you can test-drive your insurability;and if you’d like to find out a little more about our company, you can go to our website,which is www.diversefinancial.com.
JAY: David, thank you, I think this has been very, not only informative, but very timely for everyone and, to my clients and friends, I hope this will be a great year for you all and I remind you what David said, your health and your family, and I would add in, your insurability, are your two greatest assets. Please don’t waste them and be aware of them. Thank you, David.
DAVID: You’re welcome, Jay. Bye bye.
NOTE: If you have significant assets and are concerned about exposure to estate taxes and the potential for significant harm to the assets you want to pass on to your heirs, please give Michael Goodman a call at (714)585-2371 and we’ll examine your situation and let you know what we can do to help. There is no charge for the consultation and you have no obligation to do any business with us.