Why BOLI

Bank-Owned Life Insurance

How do sophisticated financial institutions finance the cost of their employee benefits while boosting the earnings on their investment portfolio and creating an immediate rise in earnings per share? Increasingly, they have turned to the tax- advantaged yield of bank-owned life insurance (BOLI) programs.

Why BOLI?

  • BOLI can reduce taxes on invested assets and achieve after-tax yields that can be significantly higher than Treasuries, enhancing shareholder value.
  • BOLI offers unique advantages over alternatives.
  • BOLI receives favorable accounting and P&L treatment relative to taxable
    • Tax-deferred growth of cash value (1)(3)
    • Tax-free receipt of death proceeds (2)(3)
    • Tax-free loans/withdrawal to basis (1)(4)(5)
    • Capital guarantees
    • Minimal credit risk

How Does BOLI Work?

Structuring Your Plan

Properly structuring a BOLI plan can be complex. Mullin Barens Sanford can help assess whether this attractive financial strategy is right for you and, if so, customize a program that meets your needs.

Mullin Barens Sanford is a premier firm specializing in institutional insurance products and consulting on non-qualified benefits. We work closely with our insurance company partners, which are chosen for their financial strength, product diversification and superior service.

(1) Subject to qualification under Tax Code Section 72

(2) Subject to qualification under Tax Code Section 101

(3) Subject to qualification under Tax Code Section 7702

(4) Subject to qualification under Tax Code Section 7702A

(5) Subject to qualification under Tax Code Section 7702(f)(7)

Notes

Variable life insurance products are long-term programs and may not be suitable for all investors. The acquisition of variable life insurance entails fees and charges and is subject to fluctuating values of the underlying investment options. Variable life insurance entails risks, including the possible loss of principal. Early withdrawals may trigger tax penalties. The death benefit coverage of variable life insurance is based on the claims-paying ability of the insurance company.

The preceding chart illustrates the effect of the income tax characteristics of life insurance on after-tax results by assuming, hypothetically, that each alternative generates the same pretax rate of return. This chart incorporates hypothetical values that, while believed to be accurate, are not guaranteed nor are they a representation of past or future results. Actual results will vary. The hypothetical taxable security values have been prepared to assist in analyzing informal funding alternatives.

 

About Mullin Barens Sanford Financial

Through a powerful combination of independence and experience, Mullin Barens Sanford Financial and Insurance Services (MBS Financial) is a leading consulting firm that assists companies with 409A and other executive benefit needs.

Disclaimer: The materials are designed to convey accurate and authoritative information concerning the subject matter covered. However, they are provided with the understanding that Mullin Barens Sanford does not engage in the practice of law, or give tax, legal or accounting advice. For advice in these areas please consult your appropriate advisors.

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