A C-suite executive who had been with his current company for most of his career, could best be described as living comfortably but modestly, while giving generously to the charities and causes he holds dear. He had also invested consistently to ensure he would have ample assets for a healthy retirement phase and pass wealth to his children as part of his legacy.

Enjoy For Today? Preserve for Tomorrow? With the right plan, the answer to both can be “yes.”

The client, a senior executive in the manufacturing space, came from modest beginnings. He began his career in the lowest levels of manufacturing management, but thanks to his diligence and focus, he rose to an executive leadership position. The client’s situation changed when his company was acquired and his years of accumulated restricted stock converted into a liquidity windfall – triggering the need for a plan to protect and preserve as much of his newfound capital as possible.

In fact, this was the first question the client asked when we met:

Is there a way for me to enjoy this money with my family for the rest of my life while still leaving my children a generous inheritance?

- client, addicus private wealth

The Addicus difference started with making sure that we understood the client’s financial situation, desires, and objectives. He wanted to maintain a healthy lifestyle, continue to give to charitable causes, and keep supporting his children after his passing. We then formed a strategy focused on how he could use his assets to enjoy the present while still passing on more than enough wealth to support his children deep into their own retirements.

After looking at projected tax impact, we recommended the formation of a new irrevocable trust to receive gifts of appreciating stock and cash. The stock was distributed to his children in order to help them support their lifestyles and retirement asset accumulation, while the cash was used to purchase a large life insurance policy.

This particular life insurance policy was not designed to pay estate taxes, as is typically the case. Instead, it was designed to reduce annual income tax and the overall estate tax.

Here’s how: The client had substantial annual exclusion gifts available that he could make each year, but failure to use them annually would make them go to waste. So, we began using those gift exclusions and transferring assets to the trust, thus reducing the taxable estate and associated tax liability annually. Additionally, the reduction of the investment portfolio after transferring those assets to a life insurance policy led to a substantial projected income tax difference.

Ultimately, we proved that the client could spend an additional $300,000 per year on cash and stock gifts to his children and charitable causes, spend the same on his lifestyle as originally planned, and still leave the same inheritance to his children as if he just kept the $300,000 per year and invested it without any planning. In essence, the client was able to spend the life insurance prior to his death. By using it properly, we made life insurance a living asset.

The business learnings included recognizing the importance of doing our homework to understand the financial and tax status of our clients, and more importantly, listening to each client’s unique desires, objectives, and fears. Using all of this valuable information, we can develop unique, inventive strategies that drive value for our clients’ lives. This is how we’re family to the families we serve.