FAQ
A MOMENT OF CLARITY
1. How is it determined how much money I can put into the LCP (tm) Plan?
The amount of money that can be put into the LCP plan depends on a number of factors, including unrestricted and available cash flow from the client’s business, credit history, and overall financial strength of the business. Current financial data, provided by the business owner will be used in this determination.
2. Is there a minimum or maximum loan amount available with the program?
The minimum is $500,000. Cases greater than $25 million can be funded, subject to insurance carrier requirements.
3. Is this Premium Financing?
No. Common features and principles of premium financing include: Long-term loans or letters of credit in which the lender sometimes capitalizes annual interest amount at the end of the year; generally an individual must have investment assets of over $5 million; and most premium finance lenders will require additional collateral in the form of marketable securities or other collateral in order to make the loan 100-150% collateralized.
4. Is it an accepted strategy to borrow money to create wealth?
Yes. The most common wealth creation strategy is the typical home mortgage transaction where the buyer borrows money to purchase an appreciating asset, a home. The same principle is utilized by the LCP.
5. Why can’t I put the money in any retirement vehicle I choose?
The Indexed Universal Life contact utilized by the LCP and Turn-Key Financial Group has been selected to maximize a client’s gain while minimizing a client’s risk. It is designed to be fully liquid, thereby serving as collateral for the loan. Therefore, the client is not required to post any personal guarantee.
6. Why doesn’t the business own the contract?
The asset protection of the retirement program would be compromised and the compensation component of the compensation component would be eliminated.
7. If there are several owners or partners in a business, do all of them have to participate?
No. The client has to be an officer and have the unanimous consent of the Board of Directors.
8. Can a trust be utilized?
Absolutely, if fact, Turn-Key Financial Group asks all of its clients to consider implementing the provisions of an Asset Protection Trust.
9. Is a corporation required to participate in the program?
Yes, it may be a LLC, S-Corporation, or C-Corporation. Turn-Key Financial Group will cover the requirements, specifically.
10. Is the loan simple interest or compound interest?
It is an interest-only loan paid on a monthly basis. It is not amortized, as such, it is a simple interest loan.
11. How long is the loan outstanding?
The initial loan is in force for a 10, 15, or 20 year period and is then subject to renewal. The goal is to have the loan in place until retirement, a change in business ownership, death, or disability.
12. How high can the interest rates go and still make a positive return?
Since interest rates on both the loan and the crediting products are variable, they historically have tended to fluctuate along similar tracks, avoiding a negative return due to rate fluctuation. While, in the short term, there will be periods of positive and negative variance, the LCP Program is a simple versus compound interest strategy. In reality, in higher interest environments affecting both the loan and the policy, it is better for the client due to the compounding effect.