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March 19, 2014 at 10:48 AM
Many tech executives in the Silicon Valley are worth millions and some have purchased life insurance policies to protect those millions once they are no longer there to do so.
But one individual went above and beyond the normal scope of life insurance policies. An unnamed Silicon Valley billionaire recently took out the largest life insurance policy ever at $201 million. This whopping policy is for good reason, however.
“The insured probably has assets of sufficient value to draw a sizable tax and justify the need for insurance; most likely that asset is a closely held business which is not ready to be sold or restricted shares of a public company,” says Steven Felsenthal, a tax and estate planning attorney at Sugar Felsenthal Grais & Hammer.
“The insured presumably doesn’t want his family to be forced to sell the business or the shares at an inopportune time or for a bargain price as a means to raise money and cover the taxes.”
Felsenthal explains that the most tax efficient way to purchase the policy would likely be in an irrevocable life insurance trust.
“The trust can be constructed in such a way that while the premiums paid for the insurance might be taxable in the trust creator’s estate, the death benefit would not be; essentially none of the premiums paid would purchase insurance that would benefit Uncle Sam,” adds Felsenthal.
