Whole life insurance can be a great executive bonus to help your your business attract and retain top talent
Using a life insurance policy as an executive bonus arrangement and/or as “Golden Handcuffs” is a great way to have offer a retention bonus to select individuals .
The purpose is of course to attract and retain top talent in your business. By offering a life insurance policy as part of their employment contract, you provide a valuable benefit that can be contractually restricted over a certain period of time — a time period you define in the arrangement agreement.
A built-in, self-vesting schedule of the available cash-value within the policy which should increase over time makes the life insurance policy more valuable over time and harder for the executive to walk away from. Any other timed restrictions that were agreed upon at the time of the arrangement contribute to making this a great enticement tool — thus being like “Golden Handcuffs” — keeping them personally financially invested in your business.
Getting Roth IRA style benefits from a whole life insurance policy
Generally speaking, this type of arrangement can also be very attractive because the possibility of the cash-value growth being tax-deferred, and the eventual tax-free use of the cash-value within the life insurance policy. This creates a scenario that mimics the tax advantages of a ROTH IRA but without any of the income, earnings, or contribution limitations.
Life insurance policy design is critical
For these type of strategies, permanent cash-value insurance is required, and the type of policies, and the policy design are crucial. As with any financial strategy using life insurance, an experienced life insurance professional should be sought to make sure the policy structure achieves the desired goal.