Heirmark® – Redefining the way affluent families, advisors and business owners acquire life insurance.

Problem:

Client is age 65, owns a business (S-Corp). He has children in the business and wishes to eventually transfer the business to the next generation. However, the client wants to maintain control of the business during his lifetime. Client also wants to efficiently transfer wealth to the next generation, managing the impact of taxes.

Solution:

Client establishes an intentionally defective grantor trust (IDGT). He seeds the trust with liquid assets and sells share of the business to the trust in return for a promissory note. The trust then purchases life insurance, which is outside of the client’s taxable estate. A portion of the earnings in the trust are used to (1) pay life insurance premiums and (2) pay note interest payments back to the client (grantor). Once the assets in the trust have grown sufficiently, they can be used to pay off the note to the grantor. All asset growth (along with the life insurance) within the trust is outside the grantor’s taxable estate. The client can still keep control the business by maintaining voting control.