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Premium Financing

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An attractive funding strategy that leverages your balance sheet — not your cash flow

WRITTEN BY: Robert Dunbar, DMC & Associates At Dunbar, Madan, Cuomo & Associates we serve our clients in every facet of their business and lives. Whether you’re a real estate developer, family office, large or small business owner or an executive, we can be there with you every step of the way. Our value proposition is not only that we are great at solving your family’s estate tax concerns or business planning needs, but that we are also able to leverage our relationships throughout nearly every industry to introduce to you to your next great employee, client, deal or venture. We’ve spent our entire career working with impressive people that have spent their entire lives amassing great fortunes, building incredible businesses and establishing themselves as the best in their fields; and we take pride in connecting you with them so that you may do the same with yours. Our business can be divided into three specific, focused areas of expertise. Each of these areas is designed to evolve with the changing needs of clients. Workplace Solutions takes into account the needs of both the employers and the employee. We’ve found that employers with happier employees have more productive employees and much easier lives. Taking advantage of large deductions can make your tax liability each year considerably lower. Likewise, with our Private Client Group, the goals are to properly prepare for life’s obstacles before they become true obstacles, and while these may vary from individual to individual and family to family, there is no substitute to solving and preparing for them early. The key focuses here are wealth management, risk management, tax efficiency, retirement planning and charitable giving strategies. Lastly, our Advanced Planning Group focuses on the issues of most importance to our most affluent clients. You’ve worked so hard to build an incredible business and amass a tremendous wealth, now the biggest question is how much would you like your family to keep and how much would you like to give to the government? The ever-evolving estate tax rules in this country have made such a question require proper prior planning to ensure the best outcome — that is, the one that you intend to happen, and not the one that the IRS decides for you. One strategy that our team specializes in is known as Premium Finance Life Insurance. Life insurance is a key component of many clients’ estate plan. The policy is owned by an irrevocable life insurance trust (ILIT or Trust) for the benefit of the client’s spouse, children, grandchildren and subsequent generations. The question that must be addressed is, “What is the best way to pay for the coverage?” Rather than using one’s own funds to pay exorbitant premiums, Premium Financing helps clients acquire the life insurance for which they have an established need by borrowing the funds necessary to pay the premiums from a commercial lender. Also known as Leveraged Life, the ultimate goal is to allow the client to retain their own funds to further their business while simultaneously acquire permanent life insurance for the effective cost of a term policy. In the simplest terms, this is done by leveraging your balance sheet and not your actual cash flow. In most cases we find that Premium Financing can be an attractive funding strategy for those that qualify and that it compliments other non-life insurance estate planning strategies. Likewise, it is a considerably more cost-effective way of funding the insurance than paying the full annual premium out-of-pocket each year. Robert Dunbar is Managing Partner of DMC & Associates, a financial services firm with offices in Manhattan, Long island and Connecticut. DMC is based in New York but happy to travel.
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