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An
Insured Deferred Compensation Plan is an excellent
tool to reward key personnel. The plan is
simple and the administration easy. Because
the plan is considered non-tax qualified, the employer
retains full control of who can participate,
and how much. And, while offering an enhanced
company benefit package to key personel, the company
also enjoys a federal income tax deduction.
At the core of the plan is a permanent life insurance
product, either whole life or universal life.
Life insurance is used because it's the only product
that provides a guarantee to pay a specific amount
at a specific time. With a piece of paper,
a drop of ink and pennies on the dollar, insurance
creates cash where none existed before, usually
far more than people can accumulate in their lifetime.
Are you interested in rewarding only key persons?
Permanent life insurance can offer several other
guarantees as well, such as a guarantee never to
expire, never to need renewing and the premium never
to increase. And unlike term insurance, which
just has a death benefit, premiums from permanent
life products can generate cash value. From
this cash value spring living benefits such as the
potential to earn dividends or interest, to use
the policy as collateral, or to borrow funds with
an interest rate as low as one or even zero percent.
For an excellent website on whole life insurance,
click Here.
Or, for universal life insurance, click Here.
When
you invest in a policy you're investing for the
future: therefor it's important the company you
place a contract with be there should the need arise
to make a claim. As an independent, Crown
Financial Services is not limited to presenting
just one company, but can freely provide you with
the resources you need to make a sound, confident
decision. Contact
Us Today!
How Insured Deferred Compensation Works
Simple
design.
Easy Administration.
The company enters into an agreement with
a key person.
Per the terms of the agreement, the company
secures a life insurance policy on the key
person. This is usually a permanent
product, either whole life or universal
life. In addition to the federal income
tax free death benefit, permanent life insurance
offers the potential of living benefits,
such as tax deferred cash value accumulation
which can be used as collateral, for loans
or surrender.
The company is the owner, payor and beneficiary
of the policy, (or the
company may choose to designate the family
of the key person as beneficiary).
While the premium is not tax deductible,
the cash value accumulation is tax deferred
and stated on the company balance sheet
as an asset.
Per the terms of the agreement (typically
at retirement) the life insurance policy
is transferred to the key employee. The
compensation is tax deductible for the company,
but taxable as income to the key person.
It may be possible for the company to bonus
or double bonus additional tax deductible
compensation to cover the tax expense to
the key person.
This is a win-win for both the company and
the key person.
• Benefits
For The Company
Enhanced company benefit package.
Freedom to choose which key persons, and how much.
Simplicity of design and ease of administration.
Can be terminated at will
(per the terms of the agreement).
• Benefits
For The Company Prior
To The Conclusion Of The Plan Or Employment
The opportunity to generate tax deferred cash value, with
living benefits available for use as collateral,
loans or surrender.
Asset on the balance sheet.
Federal income tax free death benefit.
• Benefits
For The Company At
The Conclusion Of The Plan Or Employment
Tax Deduction For Compensation Paid.
• Benefits
For the Key Person
May
be entirely independent of actual years of service.
May provide pension benefits that exceed tax qualified
plan limitations.
• Benefits For the Key Person At
The Conclusion Of The Plan Or Employment
Portable life insurance protection can be continued.
The opportunity to generate tax deferred cash value,
with living benefits.
