Case Study: Golden Handcuff for Key-Executive
The Need:
- The manufacturing company had just lost one of their key-executives to a competitor. They wanted to create an incentive to increase the likelihood that their second key-executive remains for at least the next 10 years.
Plan Implemented:
- $4,900,200 of institutionally-priced Corporately-Owned Life Insurance (COLI) on the key-executive
- Agreement between corporation and executive regarding insurance benefits during plan and bonus at completion of service
- For your review: NAIC compliance illustration
Benefits to Corporation:
- Immediate balance sheet enhancement
- Increased yield relatively to similarly liquid corporate assets
- Tax-free access to yield
- Access to $750,000 on a tax-free basis to compensate the executive; tax-deduction of benefit paid at that time
- Cost-recovery at plan maturity
Benefits to Executive:
- Ability to name personal beneficiary for $1,500,000 of life insurance during the agreement at minimal cost
- $750,000 contractually guaranteed bonus at the end of 10 additional years of service
