Captive Insurance

Your business can contribute $2,200,000 annually to captive insurance as premium, and take that amount as a tax deduction against its income each year.

The diagram above shows how a Captive Insurance Policy can optimize a business's tax and insurance profile:

1. A business owner sets up a Captive Insurance Company
2. Depending upon the owner's estate plan, a Captive can be owned by the business, a trust, or several other entities
3. Your business can deduct up to $2.2M annually of Captive premiums
4. Losses insured by your business must paid for by the Captive
5. Captive profits are paid to the owner, a trust, or other entity
6. Captives are owned by the business they insure or held in an estate planning structure

Businesses can insure their risks through a commercial insurer or create their own insurance company that can provide them custom tailored and affordable coverage. Captives manage risks and can shift wealth to junior generations. A Captive owned by a trust avoids inclusion in the estate of the senior generation. This creates an exceptional opportunity for the owners of companies to transfer substantial wealth without gift, estate or GST tax.

The premiums received by the Captive are invested and not "lost" if not used to pay claims. This one benefit drives the use of Captives for the family business more than any other. A Captive that goes five years without significant claims can easily accumulate $5M to $10M in assets. You can shift $5M-$10M to your children free of income, gift, and GSTT while creating an $11m income tax deduction for your business. The caveat is the captive is 100% liable to pay the insurance it underwrites. You can reduce the Captive’s risk by paying a reinsurance company to reinsure that risk.  

Contact us to discuss implementing a Captive Insurance Company strategy today

1. Retirement Planning - 831(b) captives are excellent asset protected retirement planning vehicles. The captive's assets are outside the business owner's estate. 
2. Family Limited Partnerships or LLCs - A captive can be owned by an FLP or LLC. The FLP or LLC could in turn be owned by various family members or trusts with different classes of interests and rights.. 
3. Ownership by or in Trust for Children and Grandchildren - This presents estate planning opportunities involving wealth transfer among multiple generations