Traditional Premium Finance in 300 Words

Traditional premium finance of life insurance is a solution that allows affluent clients to acquire the insurance benefits they need, without impacting current cash flow and the possible cost of gift tax associated with purchasing life insurance. This fully collateralized form of lending, whereby the borrower, typically an Irrevocable Life Insurance Trust (“ILIT”), borrows the life insurance premiums necessary to pay for a permanent life insurance policy issued on the life of its grantor, is specifically structured to complement a sophisticated estate plan. The ILIT is the sole responsible party for the premium finance loan, which, from the lender’s perspective removes any credit and bankruptcy risk on the insured. From the insured’s perspective, the loan does not impede his or her borrowing capacity.

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