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You May Have Some “Prepaid Jet Cards” Hiding in Your Life Insurance Portfolio

Financial Architects Partners has recently become a Magellan Jets client and they may help you pay for your next Jet Card(s). FAP manages 10 billion dollars of trust owned life insurance for approximately 300 client families. FAP has offices in Boston, Providence, Palo Alto, Minneapolis, Los Angeles and Palm Beach opening in September.

In a recent meeting with FAP’s President, Dave Freeley, we learned that many ultra-affluent families have very large insurance policies in trusts as part of their estate plan. We also learned that most clients have a “buy and hold”mindset towards this asset which is wrong and costly. Freeley likens this to building a stock portfolio and then never monitoring their returns or investigating alternatives.

FAP is referred to most of their new clients by lawyers, trustees, CPAs etc. and usually it starts with FAP being asked to perform an objective “audit” of an existing trust owned life insurance portfolio.
FAP’s rule of thumb is any policy over 5 years old can very likely be improved and any policy over 10 years old is almost guaranteed to realize significant savings/improvement. Two major reasons for this are 1) life expectancies continues to lengthen (lowers insurance charges) and 2) insurance companies have cut their profit margins drastically to compete; targeting 5-6% vs. 11%+ ten years ago.
Here are the results of a recent (and typical) portfolio audit.
Pre- audit
– Couple (age 73 and 73) with $17,400,00 of joint life insurance
– Paying 168k in annual premium
– Whole life policies dependent upon dividends
– IRR(premiums paid and death benefit received) at LE of 6.34%

Post audit
– $21,850,000 of guaranteed premium coverage
– New (guaranteed) premium 5 year step schedule starting with $55k in years 1-5, $82k 6-10 etc.
– Savings of $620,000 in premium (NPV @ life expectancy)
– IRR (premiums paid and death benefit received) of at LE increased to 10.51%

The last 15 audits FAP has performed have produced an average of $786,000 in savings and an increase of $4,428,000 in coverage. You may have some “prepaid jet cards” hiding in your life insurance portfolio.

The hypothetical casestudy results are for illustrative purposes only and should not be deemed are presentation of past or future results.This example does not represent any specific product,nor does it reflect sales charges or other expenses that maybe required for some investments. No representation is made as to the accurateness of the analysis.There is no guarantee similar results can be achieved.This material neither constitutes nor is intended to constitute an offer or anagreement to provide insurance coverage; it is intended to provide general information and is not necessarily a complete description of all terms, exclusions and conditions applicable to products and services. All guarantees are subject to the claims?paying ability of the issuing insurance company Securities offered through NFP Securities,Inc. a Broker / Dealer and Member FINRA/SIPC. Financial Architects Partners is an affiliate of NFP Securities,Inc.and a subsidiary of National Financial Partners Corp.,the parent company of NFP Securities,Inc.


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