A business owner borrows against policy cash value to buy bank shares

The situation

He had just sold his company for over $10 million and the proceeds were sitting in cash inside the corporation, taxed every year and earning close to nothing. He told the team plainly that the market was way too high, something bad was going to happen, and he wanted a pile of cash ready when it did. Every plan he had been shown was about where to invest the money. Nobody had asked the harder question, which was how he would get his hands on a million dollars in three days during a panic, when banks are slowest to say yes and there is no time to fill out forms. He wanted access to borrowing secured by policy cash value before making an investment.

What the advisor describes

• The line of credit was open before the crash, so he moved in days with no application to file.
• He drew about $1,000,000 the week markets bottomed and bought Canadian bank shares.
• Half the position repaid the whole loan a year later, interest included, and he kept the rest.
• His policy kept growing at 5-6% the whole time, because the bank lent the money, not the policy.

Where it left them

He owns about $1,000,000 of Canadian bank shares he paid nothing net to own, and they pay him roughly $50,000 a year in dividends for as long as he holds them and the banks keep paying. The loan is gone, interest included. The cash value inside the policy never left the market and kept compounding tax-sheltered the whole way through, and the death benefit will still credit the capital dividend account for his family later. He also knows the credit line can be used again.

Laurent Munier

Safe Pacific Financial

British Columbia · Preserve Wealth Group network