About Carbyne Allocation®
Put simply, Carbyne Allocation® is an asset repositioning strategy to balance asset growth potential, performance risk, tax and actuarial arbitrage. With Carbyne Allocation®, low-yield, tax inefficient fixed income assets are replaced with a properly constructed (see product assumptions) cash value life insurance. The life insurance policy is funded near IRS limits to maximize tax-advantaged inside build-up and minimize insurance costs. The result is a higher yielding asset, with significant tax-advantages that results in increased wealth accumulation.
Carrier Selection
For Carbyne Allocation® to be succesful, the underlying life insurance policy must perform for many decades to come. That means that selecting the right carrier is critical.
To select the right partner, we look for carriers that:
- Are highly rated
- Have ownership structures that prioritize policy holders such as mutual carriers or mutual holding companies
- Have demonstrated commitment to the market
- Have a history of treating clients well
Product Selection
Carbyne can be effective using other cash value life insurance products, such as Whole Life (WL) or Variable Universal Life (VUL). The use of Indexed Universal Life (IUL) is preferred because it offers a protective floor on annual indexed credits, thereby reducing the risk of policy underperformance.
Carbyne Allocation® is most effective for products that:
- Have upside return potential
- Do not add excessive risk to the clients portfolio
- Offer additional benefits, such as long term care or critical illness riders to provide added protection.
Product Design
The Indexed Universal Life policy is designed to maximize cash value accumulation. The Carbyne Allocation® does this by:
- Funding the policy for a limited time period of 1 to 7 years.
- Using an increasing death benefit in early years and level death benefit after the premium payment stop.
- Funding at or near the maximum level permitted by the Guideline Premium Test.
Product Assumptions
This demonstration is based on a generic Indexed Universal Life (IUL) product. It is not based on any particular carrier's product, but is similar to many products on the market. The product you select will have different costs and benefits. This demonstration assumes a 6.50% annual S&P 500® index credit and current charges, this is consistent with historical returns for indexed account with an 10.5% cap and 0% floor.
Disclosures
This exploratory demonstration is not a life insurance illustration. It does not reflect any particular product or carrier. The primary reason to buy life insurance is death benefit. Life insurance cash value growth may qualify for favorable tax treatment. Nothing in this presentation should be construed as a guarantee or tax advice.
