Meet
Robert
.
Meet Robert: A 60-year-old married investor in Dubai, Robert was looking to optimise his estate planning and reduce the burden of high-interest property loans. With $3 million ready for investment, he wanted to secure his family's financial future and create a debt-free property portfolio.
The IUL Solution: A Multi-Faceted Financial Tool
Robert's financial advisor, backed by the expertise of Capital for Life's team specialising in IULs and estate planning, presented an innovative solution: the Property for Life strategy. This strategy utilises an Indexed Universal Life (IUL) policy to address multiple financial goals simultaneously.
How the IUL Strategy Works
- Debt Consolidation: Robert would use an IUL loan to pay off his existing property loans, replacing high-interest debt with a more favorable IUL loan rate.
- Accelerated Payoff: Rental income from the properties would be used to overpay the IUL loan, speeding up its repayment and minimising interest costs.
- Estate Planning: The IUL's death benefit would provide a substantial financial legacy for Robert's family.
- Debt-Free Portfolio: In the event of Robert's passing, the property portfolio would be free of bank debt, with any remaining IUL loan balance covered by the death benefit.
- Investment Diversification: A portion of Robert's investment would be allocated to an investment account within the IUL, tracking the S&P 500 with a cap of 11% and a guarantee of no market losses. This adds valuable diversification to his portfolio.
IUL Advantages
- Lower Interest Rates: The IUL loan offered a competitive interest rate, leading to substantial interest savings compared to his existing loans.
- Flexible Repayment: Robert could make additional payments or lump-sum contributions towards the IUL loan, accelerating its payoff.
- Tax-Deferred Growth: The investment account within the IUL offers potential for tax-deferred growth, further enhancing Robert's long-term financial position.
- Guaranteed Death Benefit: The IUL provides a guaranteed death benefit, ensuring a significant financial legacy for his family.
The Numbers: Significant Interest Savings
Existing Property Loans: High-Interest Burden
Let's look at the interest savings Robert could achieve by consolidating his high-interest property loans with an IUL loan at 5.75%.
Consolidated IUL Loan: Lower Interest, Significant Savings
- Total Loan Amount: $2,250,000
- Interest Rate: 5.75%
- Annual Interest Paid on IUL Loan: $129,375
Annual Interest Savings: $26,275 per year
- Total Interest Paid on Existing Loans: $155,650
- Total Interest Paid on IUL Loan: $129,375
- Annual Savings: $26,275
Revised Annual Interest Calculation with 4.50% Credit: Net Interest Cost of 1.25%
- Total Interest Paid on IUL Loan (5.75%): $129,375
- Interest Credited Back to Policy (4.50%): $101,250
- Net Interest Cost (1.25%): $28,125 a year
Explanation: While the IUL loan carries a nominal interest rate of 5.75%, the IUL provider credits 4.50% of this interest back into your policy. This effectively reduces Robert’s net interest cost to just 1.25%, resulting in substantial savings compared to traditional loan options.
Annual Interest Savings (considering the 4.50% credit): $127,525 per year
- Total Interest Paid on Existing Loans: $155,650
- Net Interest Cost on IUL Loan: $28,125
- Annual Savings: $127,525
By consolidating his loans with an IUL loan at 5.75% and receiving a 4.5% interest credit back into the policy, Robert reduced his net interest cost to just 1.25%. This resulted in annual savings of $127,525 compared to his previous bank loans.
Outcome: Financial Security and Peace of Mind
Robert successfully streamlined his property portfolio, significantly reduced his debt, and created a secure financial future for his family. The IUL strategy provided him with peace of mind knowing his loved ones are protected.
I was initially drawn to the IUL strategy because of the potential interest savings on my property loans. But what really sealed the deal for me was the peace of mind it brought, knowing my family will inherit our properties debt-free and we'll leave them more cash as part of this planning and our legacy to them. It's a smart move for us.
Robert
Chief Executive Officer
Capital for Life: Your Trusted Partner
As a trusted leader in high-net-worth client life insurance solutions, Capital for Life has a proven track record of helping clients achieve financial success. Our experienced financial advisors understand the unique needs of investors like Robert and can tailor solutions to meet your specific goals.
Take the Next Step
Ready to unlock your financial potential and secure your future? Join the waitlist for Property for Life and discover how an IUL can help you achieve your property investment goals.
Disclaimer
This article is written by Carlton Crabbe, Chief Executive Officer of Capital for Life, a specialist life insurance agency providing international life insurance solutions. The information provided in this article is for educational and informational purposes only and should not be construed as financial or investment advice. While the author possesses extensive expertise in international life insurance, readers are advised to consult with a qualified financial advisor before making investment decisions or purchasing insurance products.
