Captive Insurance
A Captive is an insurance company that is formed by the parent company to underwrite the insurance needs of the parent's other subsidiaries. Captives are attractive for clients with businesses with substantial insurance risks and consistent excess positive cash flow in excess of $500,000 per year. Typically, captives are established to fill gaps in insurance coverage where the conventional insurance market either cannot provide coverage, or where the cost is considered economically prohibitive Captive insurance arrangements have boomed in the last five years.
Captives combine income and estate tax efficiency in a legal and fully-transparent fashion. Captives may invest in life insurance such as; Key Man, Split-Dollar, Buy-Sell and Employee Benefit Plans. You may exit a captive by liquidating it and paying long term capital gains or cease writing insurance and make an S election. Many advisors are only now becoming aware of the concept of the captive insurance company and introducing it to their clients. In addition to serving an insurance function, captives can also legitimately serve an intergenerational wealth transfer function and be an integral part of advanced estate planning.
|
