on Insurance Uncategorized

Toolbox for Advisors: Calculators and Templates for Insurance-Based Estate Planning

High-net-worth (HNW) estate planning increasingly uses life insurance as a tax-efficient transfer, liquidity source, and wealth-preservation tool. This practical toolbox targets US-based advisors (New York, California, Texas, Florida and other major markets) who build insurance-backed plans for estates $10M+. Below are the calculators, templates, modeling frameworks, and realistic pricing assumptions you need to run client scenarios, justify recommendations, and operationalize strategies with trustees, private banks, and carriers.

Why a dedicated toolbox matters for HNW insurance planning

  • Insurance solutions (ILITs, survivorship policies, PPLI, premium financing) are capital intensive and sensitive to small changes in rates, mortality, and policy performance.
  • Clients demand transparent scenario analysis showing after-tax family wealth, liquidity timing, and downside stress tests.
  • Regulators and fiduciaries require documentation: illustrations, assumptions, sensitivity tables, trustee distributions, and loan covenants.

Key facts to anchor your models:

Core calculators every advisor should have

Below are the essential calculators, where to use them, and the key inputs.

  1. Estate tax projection calculator (federal + state)

    • Inputs: gross estate, lifetime gifts, basis step-up dynamics, state of domicile (NY/CA/FL), marital status, charitable/SLAT planned gifts.
    • Output: projected estate tax liability, timing of tax, recommended insurance face amount to cover tax and admin costs.

  2. Life insurance need & structure optimizer

    • Inputs: target net family wealth shortfall, liquidity timeline, desired replacement (income, taxes), policy type (SUR/second-to-die, single-life, PPLI).
    • Output: optimized face amount, premium schedule, ownership (ILIT vs individual), and funding path.

  3. Survivorship vs single-life side-by-side model

  4. Premium financing stress-test tool

  5. ILIT cashflow & Net-Family-Wealth (NFW) quantifier

Templates to include in your advisor kit

  • ILIT setup checklist and trustee instruction template (funding triggers, distribution waterfall, substitution clause).
  • Client fact-finder for insurance-funded estate plans (liquidity, legacy goals, risk tolerance, tax residency).
  • Premium financing lender submission packet (balance sheet, collateral schedule, policy illustration summary).
  • Policy illustration comparison sheet (side-by-side guaranteed vs nonguaranteed assumptions).
  • Trustee reporting dashboard (quarterly policy performance, loan covenants, recommended actions).

Practical pricing and carrier benchmarks (US market)

Pricing is highly individualized. Below are realistic, market-based examples and assumptions advisors commonly use — labeled as illustrative and tied to public-rate sources where available.

  • Term-life sample point (consumer market reference): aggregated brokerage sources (Policygenius/Haven Life) show typical ranges for term life cost. Example: a healthy 45-year-old non‑smoking male might pay approximately $60–$90/month for $1M 20‑year term; a 55‑year‑old could see $200–$400/month depending on underwriting. Use Policygenius for retail ranges.
    https://www.policygenius.com/life-insurance/how-much-does-life-insurance-cost/

  • Permanent and survivorship pricing (private-client carriers)

    • Northwestern Mutual, New York Life, and Prudential are common carriers for HNW guaranteed or indexed/universal solutions. These carriers price permanents with customized underwriting and often require broker-led illustrations. Expect large-net-worth single-premium or flexible-premium UL policies to require six-figure+ annual premiums for multi‑million face amounts. Sample ballparks:
      • $10M survivorship guaranteed universal life (age 65/63 couple), target paid-up over 10–15 years: annual premium often ranges from $150k to $350k+ depending on guarantees and riders.
      • PPLI (private placement life insurance) setup and minimums: often require initial funding minimums of $1M–$5M; ongoing advisory & administrative fees typically 50–150 bps of account value. (Contact carriers and managers for firm quotes.)

  • Premium financing assumptions

Note: Always obtain carrier illustrations and lender term sheets. For boutique private banks (J.P. Morgan Private Bank, Goldman Sachs Private Wealth), loan pricing and collateral requirements vary substantially by client relationship.

Sample case study (New York client, modeled numbers)

Client: Married couple, NY domicile, combined gross estate $60M. Objective: fund federal estate tax (~40% marginal), provide liquidity for tax & admin at second death, preserve family business.

Base assumptions:

  • Federal estate exemption: $13.61M per spouse (2024) → expected federal taxable estate ~ $60M – $27.22M = $32.78M.
  • Estimated federal estate tax (~40%): $13.1M tax exposure.
  • Solution: 2nd-to-die survivorship policy $15M owned by ILIT to cover tax + admin.

Model outputs (illustrative):

  • Required face amount: $15,000,000
  • Funding option A: Single-premium paid-up survivorship GUL — one-time premium estimate range: $1.2M–$2.5M (carrier-dependent, illustrative).
  • Funding option B: Premium financing — borrower funds downpayment $300k, financed $X at 6% over 10 years; stress test increases rate to 8% — check loan covenants and ability to collateralize with marketable securities.
  • Net-Family-Wealth sensitivity: with 6% loan cost and conservative policy performance, NFW after-tax may improve vs liquidating appreciated family business assets to pay tax.

For full, step-by-step modeling, run the ILIT NFW model referenced above and the premium financing stress test linked earlier.

Comparison table — calculator outputs to present to clients

Calculator Key Inputs Primary Output When to Use
Estate Tax Projection Gross estate, gifts, state domicile Federal + state tax liability schedule Pre-sale, succession planning
Survivorship vs Single-life Ages, health, premium budget Cost curves, face-amount recommendation Spousal wealth transfer
Premium Finance Stress Test Loan rate, collateral, policy CV Debt service, margin-call probabilities Leveraged funding of premiums
ILIT Cashflow & NFW Trustee fees, gift timing, policy perf. NFW delta, liquidity timing Trustee packaging & board approvals

Implementation checklist (quick)

  • Pull up-to-date carrier illustrations and get current underwriting classes.
  • Obtain a lender term sheet before proposing premium financing.
  • Run at least three rate/performance scenarios (base, optimistic, conservative).
  • Document trustee instructions, substitution powers, and gift timing for ILITs.
  • Present net-family-wealth tables showing both policy-based and gifting alternatives — see Modeling Estate Tax Outcomes: Insurance vs Gifting — A Side-by-Side Case Study.

Final notes on accuracy and disclosures

References

Recommended Articles