Posted by (American Life Insurance Guide insurGuru©️Insurance Academy) In August 2016, the University of Michigan announced changes to its contract with football head coach Jim Harbo, including a creative useCash value life insuranceDelayed welfare compensation program.
According to the "Sports Illustrated" report, according to the disclosed agreement, the NCAA traditional powerhouse, Jim Harper of the Wolverines of the University of Michigan, became the college football coach with the highest comprehensive income in the United States that year.
This useCash value life insurance policyThe strategy of personal welfare planning will provide Harbo and his family with millions of dollars in tax-free income.This strategy is also applicable to eligible small and medium-sized companies, individuals or families.
Strategies in the Jim Harbaugh Welfare Agreement
When the University of Michigan initially hired Harbaugh, the two parties agreed to discuss the establishment of a deferred welfare program after the end of the first season.However, the final agreement may be more valuable.
Far more than the welfare deferral agreement, Hubble and the University of Michigan signed a Split-Dollar Loan Agreement-the University of Michigan agreed to paySeven loan advances, each with a loan amount of 7 million U.S. dollars, will be used by Habo to pay the premiums of the life insurance contract.
As long as the life insurance policy is still in effect, Hubble does not need to repay the loan. When Hubble dies, the University of Michigan will recover the initial $1400 million investment from the death compensation paid by the insurance company. Later generations will receive the remaining death compensation.
At the same time, as long as Hubble can comply with certain conditions that make the policy continue to be effective, the agreement allows him to withdraw cash value from the policy by borrowing (tax-free).
Other details of the agreement are not disclosed to the public. These details also include the following:
- Specifically purchasedLife Insurance Products
- Plan to withdraw cash from the policy
However, by making some basic assumptions from the known information, you can roughly estimate the benefits that Hubble can obtain from this agreement.
Views of a third-party life insurance consultant
American Life Insurance GuideUsed SchechterWealth's point of view1, Think this is a cash valueIndex insuranceThe product is strictly designed to achieve the goal of maximizing cash value growth.Afterwards, according to Forbes article2, Hubble’s welfare agreement uses exactly what is calledIndex Universal Life Insurance, Referred to as IUL The cash value insurance policy product.
Assuming that as the coach of NCAA athletes, Habo has always been in good health and has received a "Preferred" rating, he can get an initialInsurance policies with a death benefit of around $3500 million, With the payment of all 7 premiums, the insured amount may rise toAround $4900 million.
Benefits for Harper: Retirement tax-free lifetime income
According to the calculation of this policy situation, we predict that after the age of 66, Huber canWithdrawing $140 million from the policy each year, exempt from personal income tax.This source of income can last until the age of 98.
Benefits for the heirs of Harbaugh’s children: inheritance
At the same time, if Habbo has not started to withdraw money from the policy, and unfortunately dies after all premiums have been paid, then Habbo's children and heirs will receive a compensation.After deducting the amount owed to the University of Michigan in the death compensation, thisClaims are still as high as 3530 million U.S. dollars, And for heirs, yesFree of personal income tax.
If Hubble starts to withdraw funds from the policy continuously, the death benefit will gradually decrease. If it is withdrawn until the age of 98, after the last withdrawal of $140 million, Hubble has withdrawn a total of $4620 million from the policy for tax exemption. Income, insurance coverage will be reduced to a minimum of 130 million US dollars.
Cost and tax issues
Throughout the agreement, since the University of Michigan does not charge him loan interest, the only tax that Hubble needs to pay is the "estimated loan interest" tax based on the minimum interest rate set by the IRS.This estimated interest rate will vary with the interest rate of each premium advance payment, which will be the effective interest rate for the month in which the premium is paid at the time.
The company's core strategy and personal wealth management plan
Andlife insuranceAs the application of the solution to the welfare plan, it is not only limited to high-income football coaches, but also an important strategy for individuals to plan their retirement income, or for companies to bind core employees.
Taking the actual case provided by Schechter Wealth, a 55-year-old company executive earns $25 per year and hopes to receive $10 in tax-free income each year after retirement.Then using this strategy for retirement planning will be more cost-effective than using tax deferred methods-tax deferred methods need to pay $15 per yearRetirement incomeThe cost of planning-this approach also strengthens the relationship between employers and key employees and encourages employees to stay in the company for a long time until retirement.
This strategy also applies to individualsRetirement planning, In Forbes’ financial column: "How to use life insurance for retirement planning"2Pointed out that a properly designed life insurance policy isRetirement planPowerful tool.
(End of the article)
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appendix
01. "How Cash Value Life Insurance Made Jim Harbaugh a Top-Paid Coach", SchechterWealth, 10.04.2017, https://bit.ly/2xpjTHL
02."How To Use Life Insurance In Your Retirement Planning", Forbes, 05.11.2017, https://bit.ly/2xpjTHL
