Tax Free Retirement Income Strategies

An Introduction to NIW’s Program Platform

In 2000, NIW recognized that financed insurance had the potential to change the way people acquire insurance coverage. With an understanding of the significant issues clients and their advisors faced, they constructed sustainable designs tested against the harshest known economic conditions.  Since then, NIW has facilitated over $5 Billion in financed insurance loans with the lowest failure and highest persistency rates in the industry. In addition to designing successful strategies, NIW actively manages each of our programs with servicing that has gained the confidence and loyalty of our clients. 

 NIW Life Strategies provides wealthy families an alternative option to paying out of pocket for life insurance.   Typically, individuals with a net worth above $10m prefer to use financing because it preserves liquidity, saves money, minimizes gift tax, and minimizes opportunity costs. However, unlike most financed insurance strategies, NIW Life Strategies designs its strategies around harsh economic conditions, builds proactive loan exit into the design, and provides annual servicing.   This is all in an effort to minimize risks and maximize the benefit to the family.

Multi-Gen is a niche strategy that helps uninsurable, ultra-wealthy families implement additional estate planning. To be effective, the client needs to have healthy heirs to the estate. This strategy places permanent insurance on the beneficiaries while obtaining estate compression on the first generation.  This can be either a loan regime split dollar or an economic benefit regime based on the client profile.  For families with limited options, this is a highly specialized but elegant strategy resulting in a significant premium.

Cash-Stream is a company group plan that allows employers to leverage their assets with third-party financing for a fraction of the cash flow typically required to fund employee benefits.  Third-party financing enables companies to provide additional benefits or the same benefits for less money. Taking the financed money and placing it in an overfunded life insurance policy will generate additional cash flow for the firm to informally fund future liabilities such as buy/sell, post-retirement health care, pension, key man, etc. Cash-Stream is unique because it does not require the insured to die in order for the company to receive the benefits. By and large, Cash-Stream is a flexible strategy that allows the company to preserve cash flow, retain quality employees, supplement company cash flow, and provide valuable employee benefits.

Kai-Zen® is a financed strategy designed for the non-qualified executive benefit market.  Kai-Zen gives an employee the opportunity to use third-party money to contribute more to their life insurance policy without the obligation of a loan.  The policy’s cash value is the full security for the loan, which is arranged by NIW. It is the only benefit plan where a substantial amount of additional money is brought to the table, allowing employers to offer benefits that are significantly better than before with the same budget. It solves the liquidity drain associated with self-funding bonuses, key man/buy sell, and various other plans.  Kai-Zen benefits are typically 60% greater in value than a self-funded plan.

Tri-Zen®  is a financed executive bonus strategy that combines a pre-tax loan from an employer with bank lending to offer even more benefits than the Kai-Zen strategy.  The employee gets substantially more benefits while reducing the employer’s payroll costs.  In addition to reducing costs, employers improve their balance sheet by turning what was once a liability into an asset.  This asset is in the form of a loan that is paid back to the employer using the cash value from the life insurance policy. All things considered, the addition of financing makes Tri-Zen a game changer when it comes to benefit options for highly compensated employees.   

Trust Revitalization is designed for wealthy families whose legacy trusts have become diluted by an increasing number of family members.  This strategy replenishes trusts so that funds do not become depleted.  With Trust Revitalization, life insurance is obtained on some or all the beneficiaries of the trust.  To minimize the impact on trust funds, the policies are financed and wherever possible the loan interest is capitalized.  The cash value of the policies secures the loan, and some of the trust assets are used as supporting collateral if necessary.  By structuring the transaction this way, trust assets are not liquidated and earnings on trust assets are not lost. Trust liability is limited to the outside collateral and NOT the entire loan.  The death benefits and tax-free policy loans can be taken to create income flow and create asset flow back into the trust.

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