NIW Multi-generational Plan Case Study

The New Investors World Multi-generational plan allows for a conservative combination of inter-family split dollar and Asset Backed Insurance Lending (ABIL) whereby insurance is purchased on the children (G2) of an ultra-wealthy person (G1), (for whom insurance is either not possible or too expensive).
The plan allows for permanent insurance to be put in place on G2 and has a good probability of reducing the estate of G1 at the same time. This plan therefore helps the estate planning and wealth preservations for multiple generations within an ultra-high net-worth family (>$40m).

The case fact pattern. The family had already implemented substantial estate planning at end of which they still had a $80m+ taxable estate residing with G1. No further options were practically available. The NIW licensed agents presented that by purchasing in this case $35m of permanent death benefit on each of the children there was a good chance they could preserve more of the estate and at the very least put substantial insurance on G2 who while wealthy , were really going to inherit most of their wealth on the death of G1. What were the key points in this scenario?
The agents firstly presented the concept to the families Attorney and CPA. To convince them, extensive modeling, risk analysis and worst case performance simulations were presented –this is one of the key strengths of the NIW team. The CPA also visited NIW to reinforce his understanding of the economic logic, the transaction and the underlying design with regards to the insurance side. The difference here is that NIW was using an Index Universal Life product that allowed the plan to: A) keep insurance in place on G2 unlike most other inter-generational split dollar plans and B) had a logical loan exit strategy in place.

Minnesota Life and Allianz life products were selected because of their superior ability for loan exit capability and their ability to recover from under performance situations.
Another service factor that was important to the client advisors was NIW's support capability that would monitor the case once in place, through to completion. Next NIW had the plan pre-approved with the life carriers so that inheritance could be taken into account to justify large life policies. This allowed $35m of coverage to be place on each G2 for a total premium outlay of just under $7m per year. The design was a 10 pay design allowing for a $70m loan to be put in place. In addition the interest was capitalized resulting in a loan expectation of around $100m.
Then NIW provided lending support in partnership with a conservative lender who had the financial strength to underwrite $100m+ loans, good commercial lending rates and also who had had a supporting credit team briefed by NIW so they understood the guaranteed safe nature of these loans. The lender uniquely had legal support that had in depth technical expertise so that the loan documentation was custom tuned to support the strategy being implemented.
In other words the entire supply chain from design, life product selection and lending along with post sale support was aligned and on the same hymn sheet.

The agents, not only ensured that the advisors were on board and understood the plan but over the 18 month sales cycle educated and obtained the by in of all the family members G1 and G2 involved.
The family had plenty of liquidity and so the question was raised "why not use our own money using an intra-family loan this is a common approach within very wealthy families?
One of the examples NIW showed was how the intra family loan in terms of opportunity cost was very significantly more expensive to the family than a commercial loan from an NIW partner lender. In other words it was not just the economic logic of the design along with the risk bracketing that was explained by the agents, but the modeling also gave a reason as to why the source of funds should be from commercial lending.

The case resulted in a sale of a total of $105m in Death Benefit coverage and a target premium of $2.47m.


For more details on this, and other case studies, please contact an NIW representative.