Case studies
Examples are hypothetical, based on assumptions and not guaranteed.
Variable Annuity. Steve has been investing in high yield debt instruments for years. His portfolio is $8 million and his average annual yield is 8%. Steve, a California resident, earns interest on the portfolio, pays his state and federal tax, and lives on the net amount of approximately $365,000 per year. Steve decides to purchase a variable annuity from Portola, and Portola can invest the segregated account in a similar asset class, yielding 8% per year. Steve selects an annuity with an immediate payout of $440,000 per year for 30 years, which results in approximately the same net after tax amount of $365,000. The difference is that at the end of 30 years Steve’s account is expected to be worth more than $17 million. At that point, it can either be cashed out or paid to a beneficiary, such as Steve’s children, for their lifetimes. In either case, the amount left is substantially more than Steve would have had without purchasing the variable annuity.
Life Insurance. Another option is for Steve to purchase a $14 million life insurance policy for annual premiums paid over several years, which results in approximately $4 million of total premiums. Portola can invest those premiums in a similar asset class in which Steve was previously investing. After Steve completes paying the premiums, the projected account value in the life insurance policy can be expected to be over $5 million ($1 million more than Steve would have had). In 15 years, the account value is expected to be more than $8 million. At any time, Steve can borrow from his life insurance policy for additional living expenses, health care, or for any other reason. When Steve passes away, the greater of the account value or the $14 million death benefit, net of policy loans, is paid income tax free to his beneficiaries.
Modified Endowment Contract. Bob has different circumstances from Steve. Recently retired and in good health, Bob has enough income and savings to live comfortably but wants to pass a portion of his assets to his children as efficiently as possible. Bob pays a single premium of about $5 million for a paid up life insurance policy, known as a modified endowment contract. Portola invests the premiums in a portfolio expected to generate 8% per year in asset classes with which Bob is comfortable. The earnings are tax free. Therefore, taking into account fees and costs of insurance, the projected account value (i.e. death benefit) is more than $15 million after 15 years. Upon Bob’s death, the death benefit is paid income tax free to Bob’s designated beneficiaries.
Licensed and qualified professionals may contact Jim Weisz or Scott Santagata at (949) 243-7360.
Portola Life Insurance Company, I.I.
802 Fernandez Juncos Avenue, San Juan, Puerto Rico 00907
