Tritium Private Wealth Strategies leverages every possible tool, including estate, business succession, and executive benefit planning, to protect wealth over very long periods. Thanks to expertise in accounting, legal regulations, and financial management, we are able to carve out unique paths that avoid taxation pitfalls and other risks to securing wealth.
Tax Efficiency for U.S. Tax-Exempt Institutional Investors
Quentin C. Sturm, J.D., CPA
Quentin, a former national director of the estate planning services unit of Coopers & Lybrand (now owned by PricewaterhouseCoopers), is a highly respected leader in the financial services industry. With over 40 years in the legal and accounting disciplines, Mr. Sturm is an invaluable partner on any team, adding sophistication and a wealth of advanced financial planning knowledge.
Robert J. Bagonis, Jr.
Robert specializes in quantitative analysis, financial modeling, and integrated insurance design. He was the youngest manager and senior strategist of the advanced sales team for one of New England Financial’s largest agencies. He is uniquely qualified to provide a broad spectrum of financial planning options, including premium financing, COLI, supplemental retirement income, and cost recovery. Robert has established and trusted relationships with all major insurance carriers.
Premium Financing is a financial planning tool that Tritium utilizes to assist qualified insured individuals in overcoming the challenges in funding large life policies. Our model alleviates that burden by activating a third party lender to finance the purchase.
The value of life insurance for estate liquidity, protection planning, business coverage, or as an alternative asset class is naturally weighed against the capital or cash flow required to support the associated premium payments. High net worth individuals will often forgo the purchase or acquisition of needed insurance because of age and underwriting requirements that make premiums cost prohibitive or to preserve cash flow and capital for other important projects or investments
Most self-made millionaires are comfortable leveraging their assets and have used that strategy to create wealth. Premium finance permits clients to leverage their current assets and the policy's cash surrender value to obtain the coverage they need.
Clients can significantly reduce gift and estate taxes by paying interest instead of premiums and structuring ownership of life insurance products properly. Premium financing can also help clients use more of their annual gifting exclusions, rather than tapping prematurely into lifetime exemptions.
Many high net worth clients earn double-digit returns on their investments, be it in their business, real estate, or other investments. Premium finance allows those clients to keep their money working for them in those high return asset classes.
Utilizing premium finance reduces client outlay in the early years thereby increasing long term Internal Rate of Return (IRR).
Our designs combine properly structured preferred loans with non-correlated fixed insurance products. The reward of a properly designed life policy is the spread between the loan rates and the crediting rate of the policy. A healthy spread allows for the purchase of a large policy using significantly less out-of-pocket capital than paying for the full premiums through traditional means.
Overfunded Whole Life and Indexed Universal Life (UL) are currently the most popular products for financing today and for good reason. Whole Life offers the benefit of consistent dividend crediting year after year, albeit with lower returns (though on par with tax-free bond portfolios). Indexed UL (IUL) is driven by market performance but not directly invested in the market. IUL generally tracks an index (such as the S&P 500) and will credit the policy if there is a gain in the market while providing downside protection in the form of a floor (0-1%) if there is a drop in the market.
Our design generally features a minimum of paying 5-10 years of contributions (at least the interest), accruing interest if necessary. Then, in year 11+, policy surrender value is used to pay loan interest and principal over a period of time. Policy and loan review on an annual basis is required to ensure the success of the design, but a loan can be managed effectively as long as the policy growth can at least pay the loan interest year to year.
Nearly all major banks compete in the premium finance space, even if they don’t advertise it. We work with our clients’ existing banking relationships or shop for other lenders for the best possible rates and terms. Generally, we target jumbo loan rates based on LIBOR (London Interbank Offered Rate) plus a spread from a lender.
Collateral requirements will vary by lender, financial condition of borrower and the negotiation process with the lender. In general, assets that are used for collateral include:
Depending on the lender, other assets may be acceptable such as accounts receivable or annuity surrender value.
Business owners seeking a smooth and equitable transition of their interests should seek a competent, experienced team to assist them in this matter. If your objective is to continue the business after death and not have it liquidated or sold to a third party, several options and considerations are possible.
Transition to Family or Family Sub-groups
Transition to Employees
Management Buy Out
A qualified team of hand-picked people can continue operations and handle the proper administration of the succession plan. U.S. tax-related withholdings and for handling all K-1s and state filings for the assets.
Consider the use of Beneficiary Controlled Trusts (BCTs) and Family Limited Partnerships (FLPs) to remove new ventures from your taxable estate while maintaining control of the asset.
Consider your charitable intentions and how you intend to fulfill these intentions. The following vehicles are often used to accomplish philanthropic objectives: