A Family Who Works Together: Life Insurance for Closely Held Businesses

With consumer trends demonstrating a tip toward personally driven decision-making and evidence suggesting that millennials desire more purpose-driven careers, family owned and operated businesses are having a renaissance moment. One such company— a growing life science company held by two brothers in Seattle — came to us looking to transfer ownership to the next generation of millennial adults, who are excited to carry on the legacy of their family business.

Given that the interest of so many family members rests within the business, the brothers wanted to provide income protection to surviving spouses while still maintaining control of the business with the surviving family members. To help meet this objective and minimize taxes in the transfer, we set up life insurance policies for each new family shareholder, with each policy being paid for by the company. Now, each plan provides spousal income support for the husbands and wives who are not direct shareholders in the family business, providing them with income protection and peace of mind.

With a limited number of shareholders and the family objectives having a profound influence on the company’s future, they understood the importance of having a plan in place for the transfer of stock when key shareholders retire. Without a plan and life insurance for surviving spouses, the unexpected departure of one major shareholder could signal the end of the business they worked so hard to build.

As a fellow family business, we’re in the business of keeping these businesses and their interests protected — and thriving — and have more stories and strategies for protecting, preserving, and providing support for the transfer of successful business ownership to the next generation. Something tells us that they’re more than ready to take the helm.


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“Experiences of clients with life insurance products will depend on their unique facts and circumstances and we cannot guarantee the same results for all clients.”

Life Insurance and Mortgage Commitments: A Power Couple?

You could call Will and Tomiko and power couple, and many do. They would say it’s silly, but those who know them, and work with them, would tell you that they are equally driven and give 110% to their careers and to each other. Just colleagues at first, Will and Tomiko met in their early 30’s as rising stars at their mutual employer, Amazon. It wasn’t long after their initial meeting that Will from Software Development and Tomiko from the Kindle Team became simply, “Will and Tomiko.”

With early success in their individual careers at Amazon, both Will and Tomiko were living in downtown condos that they loved. So, when it came time to move in together it took them a while to decide on a place close to their downtown offices and they eventually ended up renting.

Fast forward a few years later: Working from the Amazon offices in South Lake Union, Will and Tomiko are married, and have just purchased their dream home in Westlake with a 30-year mortgage. While the fixed interest rate was appealing to them and recommended by their lender, they didn’t like the idea of having a mortgage payment hanging over their heads for the next 30 years. So, looking to put their collective excess earnings toward the mortgage, they set a goal to have the resources to pay off the mortgage in 10 years. Ambitious? Yes. Possible? Absolutely.

To do so, Will and Tomiko met with us and decided to invest their excess family income into a Life Insurance policy that will provide tax-deferred growth on the cash value to help pay their 30-year mortgage after 10 years. Not only will they meet their goal and own their forever house outright, they also get the added benefit and assurance of having a policy in place for their chosen life partner.

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“Experiences of clients with life insurance products will depend on their unique facts and circumstances and we cannot guarantee the same results for all clients.”

No Pro-Con List Required: Planning for Spousal Survivor Support

Sean has always been a planner. His family likes to joke that his first word might as well have been “plan,” and that he could draft a solid pro-con list before he could write a full sentence. Family jokes aside, Sean’s desire to thoroughly weigh his options, keep a meticulous calendar, and strategize one or two moves ahead have all been an important part of his success.

Happily married with one child at the neighborhood preschool, Sean loves his job at Amazon and earns $250,000 a year with great stock options. Since the birth of their son Malik, Sean’s wife Nia has chosen to stay at home to care for him; and given Sean’s salary, they’ve been able to comfortably maintain their lifestyle without Nia in the workforce. While she hopes to one day open her own Interior Design firm once Malik’s in school full time, Sean’s income provides stable support for their family of three.

However, Sean’s propensity for thinking ahead had him concerned about income protection for Nia and private school expenses for Malik should something ever happen to him, or his stock options. Without a runway of planning time, Nia doesn’t have great options for easily getting back in the workforce and private schooling for Malik has always been important to them.

Thinking ahead, Sean sat down with us to acquire a tax-favored Life Insurance policy that would provide income to support Nia in his absence, along with additional financial support if it would be needed for Malik’s private school education. Natural born planner or not, we believe setting your family up for the future is always a good decision; no pro-con list required.

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“Experiences of clients with life insurance products will depend on their unique facts and circumstances and we cannot guarantee the same results for all clients.”

One-Way Ticket: Family Income Protection for High Earners

With two young kids and a husband who adores her, Lisa holds an executive position at Microsoft and often wonders how she got so lucky. Lisa and her husband Drew relocated to the Seattle area 12 years ago so that she could make a career transition into the technology space and they’ve never looked back. Though she didn’t have a job when they headed west with a one-way ticket, Microsoft hired Lisa after a few months of job searching and she quickly moved up through the ranks. She now has a team working for her, something she never could have imagined when she first completed her graduate program.

With a job that she loves and a family of three that counts on her income, Lisa’s primary financial concern is excess taxation due to her income tax bracket. Through a colleague at Microsoft, Lisa was introduced to us and thought it was time to explore her big-picture financial plan and how life insurance might benefit her family during her lifetime — something she had heard of, but never explored. At the age of 42 she didn’t think it was necessary yet.

After meeting with us to review her finances, long-term goals, and the future educational expenses for her kids, Lisa decided to purchase a Life Insurance Policy to provide family income protection if something ever happened to her. It’s a plan that will also offer access to tax-favored income during her lifetime that can be used for educational expenses for her two future computer programmers, or at least that’s what she likes to think!

The plan gives Lisa peace of mind knowing that her kids have tax-preferred financial resources for their education, affording them the same opportunities that she had: a good education and the freedom she had when she took the risk of boarding the plane to Seattle all those years ago.

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“Experiences of clients with life insurance products will depend on their unique facts and circumstances and we cannot guarantee the same results for all clients.”

 

 

 

 

 

 

 

 

Love Is As Simple As Thinking Forward

Sara and Ravi met in the back row of business class at U-Dub. He likes to say it was love at first sight; she likes to say that it took a few dates and a sailing trip in the San Juan Islands — and ultimately Ravi’s patience and care for her family — that sealed the deal. They were married just a few years after graduation in a small ceremony on Orcas Islands; and now, at the age of 40, they have been married for 13 years and live in Sammamish near the lake where Ravi rows every morning (rain pending of course!).

With good jobs and a lifestyle they love, Sara and Ravi make a collective income of $300,000 a year, but are concerned about the long-term care expenses they may face in the future. Living close by, Ravi and Sara have watched her parent’s retirement assets slowly diminish due to her father’s health condition, which requires ongoing care from her mother. Without additional resources to support them, they are looking to move out of their Queen Anne home — a home they’ve shared for 40 years and the place where childhood memories are stored for Sara and her younger siblings. While it may be too late for her parents, it’s not too late for Sara and Ravi to plan ahead.

Ravi likes to think he’ll continue his active lifestyle well into old age, but no one knows what the future holds, so they decided together to put a plan in place to ensure they were covered for any necessary long-term care. With an Index Universal Life Policy with a Long-Term Care Rider for Sara and Ravi both, they were able to acquire a $2 million dollar policy for income protection, with a $1 million long-term care rider that covers any future long-term care expenses.

Knowing that 70% of Americans eventually need long-term care and seeing how it’s affected her parents, it was an easy decision for Sara and Ravi. Now that they have a plan in place for their own future, they can continue to offer help and support to Sara’s parents, who have helped them along the way so many times before. Often times, love is as simple as thinking forward.

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“Experiences of clients with life insurance products will depend on their unique facts and circumstances and we cannot guarantee the same results for all clients.”

Indexed Universal Life Insurance: Retirement Never Looked So Good!

For Noah, a successful architect and residential builder, “tax favored income” was beginning to feel unobtainable. With a rewarding, but challenging career and a firm that he built from the ground up, Noah watched his parent’s generation retire to both successful and unsuccessful results. Itching for time and resources to pursue his dream of building a LEED certified house on Whidbey Island — and understanding that his success only means so much without a plan for retirement — Noah’s personal CPA referred him to us for a consultation.

With a respectable income and two IRA’s that he opened in his early twenties, we sought a way to supplement Noah’s future retirement income while minimizing taxes on his existing assets. The solution for Noah was simple: invest the maximum premiums allowed into an Indexed Universal Life policy that would provide him with benefits during his lifetime that could be used as supplemental income during his retirement years.

Here’s how it works for Noah. With the downside protection of a Universal Life Insurance policy and the upside potential that Indexed Life Insurance provides, the Indexed Universal Life policy combines strong growth opportunities with protection, falling right in the middle of the risk versus reward scale — Noah’s personal comfort zone. Without participating in stock or equity markets, Noah’s Index policy will credit interest based only partly on an equity index and the interest earned will never be less than zero or greater than any CAPS imposed by the carrier.

By investing the maximum after-tax premiums allowed over a 5 year period and receiving the minimum death benefit required, Noah is able to use the funds during his golden years of retirement. While he isn’t the classic case of someone who would require a solid life insurance policy — a healthy single professional nearing the apex of his career — the policy offers Noah the peace of mind that if anything happens to him, there is a death benefit for his family to rely upon. So what now? He can simply sit back, plan his retirement, and design his dream house while his Index Universal Life Insurance policy does the work for him.

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“Experiences of clients with life insurance products will depend on their unique facts and circumstances and we cannot guarantee the same results for all clients.”

What We Talk About When We Talk About Life Insurance.

The future: full of great possibility, yet largely unknown. It’s easy to dream about, but difficult to plan for, especially financially. When you’re at the height of a great career with a thriving and healthy family, who needs to think about life insurance?

Somewhere along the way life insurance got a reputation for being reserved for those nearing retirement, old age, or simply planning for the unthinkable — and who wants to do that? Too often, life insurance doesn’t get portrayed for what it truly is: a thoughtful living asset that provides protection for the ones you love.

Let’s talk about a real life example. With a successful tech career, Carter, age 45, contacted us looking for a life insurance policy that would provide for his only son and wife in the unexpected event that something should happen to him.

With Carter’s objective in mind, we reviewed his financial picture identifying a savings account that was earning minimal interest. We set out to reallocate a portion of the saving account assets to fund a personally owned policy for Carter, structured to provide a greater rate of return and benefit his family during his income producing years, should something unexpected happen. This gave Carter peace of mind that, come what may, he had built a safety net for his family.

Let’s talk about benefits. You might think that Carter’s new life insurance policy will sit around until the unthinkable happens, but you’d be mistaken. During his lifetime, the policy is designed to provide tax-free growth on his investment, supplemental tax-free income at the time of retirement and death benefit protection. Put simply, life insurance is an incredibly powerful financial tool that’s flexible, tax-preferred, and quick and easy to obtain — especially for those already living a healthy life.

At The Lyman Group, what we talk about when we talk about life insurance isn’t just the possibility of death. It’s about truly living — always looking forward, leaving behind a meaningful legacy, and protecting all that makes life worthwhile. Download the TLG Life Insurance E-book to learn more about the benefits of life insurance and make informed decisions that will protect the future of the ones you love most.

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