Richard CanfieldPodcast Host and IBC Advisor, Ascendant Financial · Authorized Infinite Banking Practitioner | Author of 4 Books

Corporate Shareholder Borrowing diagram for Insured Retirement Plan

20 Jun 2022 · 2 min

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1:38

This YouTube presentation (Richard Canfield, June 20, 2022) explains "shareholder borrowing": a lending institution lends directly to a shareholder while using the corporation’s policy cash values as collateral. The video covers operational mechanics (how the corporation may still access loan proceeds via salary or dividend), a commonly-used mitigation strategy where the shareholder pays a guarantee fee (and questions about what constitutes a reasonable fee), and the tax/flow outcome on insured death where the corporate beneficiary receives the life-insurance death benefit tax-free.

Chapters

The second one is what's called a shareholder borrowing. And that's the one that I want us to drill in today to talk about. And this is when the lending institution lends directly to the shareholder. So the one who's receiving the loan proceeds is the shareholder, but the one who's collateralizing the loan as security. Because when you're a lender, you need to collateralize for security, they're going to do it to the company's cash values of the policy. And that corporate program like Jason mentioned, the corporation will still access money from the loan and then they distribute the funds via a salary or a dividend. Again, the choice is up to the individual and for whatever reason, they decide. Now, when it comes to the shareholder in the shareholder borrowing, a very common, let's say, strategy that people will do is they will say to get around this, we will have the shareholder pay a guarantee fee to try to mitigate that collateral benefit assignment to the company to guarantee the loan. So this is where again the potential landmine can be is what is a reasonable guarantee fee. And I'll dive into a case study that has happened on using that guarantee fee. Just going back to the corporate insured retirement program. How this makes sense is death occurs and the company is going to be paid a death benefit. So on that death, the death benefit insurance proceeds gets paid to the corporation tax free. And when it's set up properly, again, the funds will create a capital into the corporation, but the proceeds are still going to be received by the corporation.