Incentive Bonus Strategy
Executives today are faced with trying to simultaneously accomplish a broad range of financial objectives, including providing financial security for their family in the event of an untimely death, plan for college and save for retirement, all at the same time. An Incentive Bonus Strategy used for the purchase of life insurance can help the executive accomplish his/her financial objectives all at once.
In the Incentive Bonus Strategy, the executive purchases a life insurance policy with his/her personal dollars. The employer agrees to reimburse the executive in the form of bonus (the amount of the bonus is "grossed-up" to accommodate for income taxes incurred by the executive).
With a properly structured life insurance policy the executive can accomplish:
- Replacing the income lost to the family should the executive die prematurely;
- Providing tax-free supplemental retirement income through withdrawals and loans;
- Providing cash liquidity to pay for college, or other financial objectives.
The employer accomplishes:
- Providing a very attractive means of appealing to and keeping good quality employees;
- Tax-deductible compensation paid to the executive.