We have been warning advisor partners and clients for some time about the vulnerability of banks across the country and how we feel a little risk spreading is a good idea from both a bank solvency and Asset Protection standpoint.
The first link below is to an article that shows how vulnerable some banks in Arizona are, as just one local example of a national crisis. There have been over 80 bank closings across the country since January 1 of this year and a highly placed banking executive has informed us that the FDIC has basically run out of money twice in the last nine months. The second Link describes one of the solutions we are implementing.
THE PROBLEM:
Report: 60 Percent of Arizona Banks Vulnerable to Failure:http://tinyurl.com/2dcgnp9
And one of the SOLUTIONS: Creditor Protected Alternatives To Cash:http://tinyurl.com/lkwqtv
Please take a look at this and share with anyone you feel it would help. As always, call us for help or with questions.
Yours, Ike
Showing posts with label creditor protected cash alternatives. Show all posts
Showing posts with label creditor protected cash alternatives. Show all posts
Monday, June 14, 2010
Monday, October 19, 2009
Ike Devji's Article Featured Nationally on Financial Advisor Match
The Article: Creditor Protected Cash Alternative and Wealth Multiplier?
Was picked and published on FinancialAdvisorMatch.Com as of this AM.
Click here to see the article in full :http://www.financialadvisormatch.com/community/articles/1253_creditor_protected_cash_alternative_and_wealth_multiplier_.html
Was picked and published on FinancialAdvisorMatch.Com as of this AM.
Click here to see the article in full :http://www.financialadvisormatch.com/community/articles/1253_creditor_protected_cash_alternative_and_wealth_multiplier_.html
Friday, September 18, 2009
CREDITOR PROTECTED CASH ALTERNATIVE AND WEALTH MULTIPLIER?
“What is an alternative to my current cash position that will protect my money from litigation?”
By Ike Devji, J.D.
In our current economic environment, all clients want their money both safe and liquid.
When most people consider “safe” and “liquid,” they immediately think of their bank. However, what most people do not know is that their checking or savings account is unprotected from a very real threat: the exposure to an increasingly hostile and predatory litigation system. Consider this:
There are tens of thousands of lawsuits filed each day in this country. The average legal cost of defending a frivolous lawsuit is $91,000, plus the settlement amount itself. The number of lawsuits increases in tough economic times as people look to your wealth as an additional source of income.
Our team often takes commonly used tools and redesigns them to provide protection of client assets, while allowing clients to retain control and liquidity. This where the sciences of Financial Planing and Asset Protection meet. The situations below demonstrate the benefits of a strategy we are using in which we take a universal life insurance policy and design it to provide 98 to 102 percent cash surrender value in the first year.
Current Situation—Cash in the Bank: A healthy 45-year-old male client has a bank checking account with $1 million. He rarely uses this account, but he keeps his money there because he likes to have a certain amount of funds liquid in case he needs to access it quickly.
Here is how a regular, personally held bank account works:
· The account earns about 1 percent interest per year, with income taxable as ordinary income.
· If the client is sued for any reason and loses, the judge can require the transfer of the assets from the client’s checking account and into the plaintiff’s pockets.
· If the client dies, the named beneficiaries will receive the $1 million minus the taxes due.
· If the client needs to use the money, he is able to take the amount needed.
BETTER: Creditor-Protected Cash Alternative:
The strategy our team has designed allows the same client to place the $1 million into a specially designed universal life insurance policy by paying a premium amount of $500,000 in each of the first two years.
The policy will provide the following benefits:
· The account will earn a net interest of about 1 percent annually invested in the policy’s fixed account, and the gains are allowed to grow tax-deferred. If the client is sued for any reason and loses, the money in this account is 100 percent creditor-protected from day one.
· If the client dies, the named beneficiaries will receive a death benefit of $10,624,682, the face amount associated with this specific example, free of any estate taxes.
· If the client needs to withdraw all or part of the money in the account, he is able to do so at anytime with no fees or surrender charges, and he will have access to the money within a week.
By Ike Devji, J.D.
In our current economic environment, all clients want their money both safe and liquid.
When most people consider “safe” and “liquid,” they immediately think of their bank. However, what most people do not know is that their checking or savings account is unprotected from a very real threat: the exposure to an increasingly hostile and predatory litigation system. Consider this:
There are tens of thousands of lawsuits filed each day in this country. The average legal cost of defending a frivolous lawsuit is $91,000, plus the settlement amount itself. The number of lawsuits increases in tough economic times as people look to your wealth as an additional source of income.
Our team often takes commonly used tools and redesigns them to provide protection of client assets, while allowing clients to retain control and liquidity. This where the sciences of Financial Planing and Asset Protection meet. The situations below demonstrate the benefits of a strategy we are using in which we take a universal life insurance policy and design it to provide 98 to 102 percent cash surrender value in the first year.
Current Situation—Cash in the Bank: A healthy 45-year-old male client has a bank checking account with $1 million. He rarely uses this account, but he keeps his money there because he likes to have a certain amount of funds liquid in case he needs to access it quickly.
Here is how a regular, personally held bank account works:
· The account earns about 1 percent interest per year, with income taxable as ordinary income.
· If the client is sued for any reason and loses, the judge can require the transfer of the assets from the client’s checking account and into the plaintiff’s pockets.
· If the client dies, the named beneficiaries will receive the $1 million minus the taxes due.
· If the client needs to use the money, he is able to take the amount needed.
BETTER: Creditor-Protected Cash Alternative:
The strategy our team has designed allows the same client to place the $1 million into a specially designed universal life insurance policy by paying a premium amount of $500,000 in each of the first two years.
The policy will provide the following benefits:
· The account will earn a net interest of about 1 percent annually invested in the policy’s fixed account, and the gains are allowed to grow tax-deferred. If the client is sued for any reason and loses, the money in this account is 100 percent creditor-protected from day one.
· If the client dies, the named beneficiaries will receive a death benefit of $10,624,682, the face amount associated with this specific example, free of any estate taxes.
· If the client needs to withdraw all or part of the money in the account, he is able to do so at anytime with no fees or surrender charges, and he will have access to the money within a week.
To Summarize the benefits again:
- Creditor Protection
- Wealth Multiplier Effect of 10X (in this illustration)
- Liquidity and borrowing options with no penalty
- Death benefit of $10MM plus that passes outside the estate and free of estate tax
My thanks to Insurance and Investing Expert Jeff Christenson for his help on the technical details of the insurance policy. Together we implement this strategy for clients and advisors nationwide.
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