System for funding, analyzing and managing life insurance policies funded with annuities

• US 7,644,022 B2
• Filed: 06/17/2005
• Issued: 01/05/2010
• Est. Priority Date: 11/09/2000
• Status: Expired due to Fees

• Current Assignee: Bart Kavanaugh
• Original Assignee: Bart Kavanaugh
• Inventors: Kavanaugh, Bart
• Primary Examiner(s): PATEL, JAGDISH
• Application Number:
  US11/154,572
• Publication Number:
  US 20050234747A1
• Time in Patent Office: 1,663 Days
• Field of Search: 705/35, 705/36, 705/39
• US Class Current: 705/35
• CPC Class Codes: G06Q 20/10 specially adapted for electronic funds transfer [EFT] systems; specially adapted for home banking systems
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03
• CPC Class Codes: G06Q 40/08 Insurance
• CPC Class Codes: G06Q 40/10 Tax strategies

Abstract

The invention relates to a program that administers a method of funding life insurance policies using annuities that are purchased at least in part using borrowed money, using business and trust structures to reduce and/or eliminate tax. This investing can be done either directly by the policy or through the trust and/or other business entity. As an internal investment of the insurance policy the income generated by the annuity and the inside build-up are non-income taxable to the owner of the policy. The resulting death benefits will also be non-income taxable to the beneficiary.

Claims

1. A method of managing combined life insurance and financial instruments for a group of insured persons using a computer system including a database and communications software to permit the computer system to receive data from and to transmit data to a plurality of external entities, the method comprising the steps of:

(a) having arranged for an influx of capital from a source of capital, wherein said source has imposed certain repayment obligations concerning said capital, and having input data concerning the amount of said capital and said repayment obligations into said database;

(b) having acquired through a first entity at least one financial instrument providing a cash flow for each insured person using a portion of said capital, wherein the first entity is owned by a second entity that is of a tax favored nature, and wherein said cash flow of each financial instrument is allocated to the second entity so that it receives tax favored treatment, and having input into said database information concerning said cash flow of said financial instrument;

(c) having acquired at least one life insurance policy for each insured person, the at least one life insurance policy being acquired by a set of third entities, each third entity having an owner wherein the owner of each third entity has an insurable interest in one of the group of insured persons, and each third entity has acquired at least one life insurance policy on the life of the insured person in which its owner has the insurable interest, and wherein each life insurance policy imposes on its respective third entity a premium payment obligation to pay a premium on a regular basis, and wherein each third entity is organized in a manner to shield the insured person on which it has acquired life insurance from liability from the commercial lender and from any taxes on the financial instrument acquired for that insured person; and

wherein a portion of said capital has been used to pay the initial premium for each life insurance policy, and having input into said database information concerning said premium payment obligations for each life insurance policy;

(d) receiving and tracking information, via the computer system, concerning said cash flow from each financial instrument, and maintaining information in said database pertaining to said cash flows;

(e) monitoring and executing, via the computer system, the distribution of said cash flow from each said financial instrument to pay the premiums for the respective life insurance policy associated with each said financial instrument and to repay said source of capital, wherein the amount and timing of said distributions of said cash flows are dependent upon said premium payment obligation information for each such life insurance policy stored in said database and dependent upon the repayment obligations imposed by said source of capital stored in said database; and

(f) updating the database of the computer system upon each such distribution of said cash flows to reflect each such payment of a premium for said life insurance policies and each such payment of the repayment obligations for said capital.

2. The method of claim 1, wherein the financial instrument is an annuity.

3. The method of claim 1, wherein the second entity comprises an insurance company.

4. The method of claim 1, wherein said source of capital comprises financing from a commercial lender.

5. A method of managing combined life insurance and financial instruments for a group of insured persons using a computer system including a database and communications software to permit the computer system to receive data from and to transmit data to various external entities, the method comprising the steps of:

(a) acquiring or having acquired through a first entity at least one financial instrument for providing an income stream for an insured person, wherein the first entity is owned by a second tax favored entity and having input into said database information concerning the income stream and repayment obligations of said at least one financial instrument;

(b) allocating the income stream to the second entity so that the income stream receives tax favored treatment;

(c) acquiring or having acquired at least one life insurance policy on the life of the insured person, the at least one life insurance policy being acquired by at least one third entity, whereby each life insurance policy has associated therewith a premium payment obligation to pay a premium on a regular basis, and the third entity shields the insured person from taxes on the income stream;

(d) inputting into said database information concerning said premium payment obligations for each life insurance policy and using said database to track and maintain the premium payment obligations of each third entity for each life insurance policy;

(e) monitoring and administering, via the computer system, the income stream and each life insurance policy;

(f) distributing, via the computer system, at least a portion of the income stream to pay a premium for each life insurance policy; and

(g) updating the database of the computer system upon each such distribution of the portion of the income stream to reflect each such payment of a premium for the life insurance policy.

6. The method of claim 5, wherein the financial instrument is an annuity.

7. The method of claim 5, wherein the second entity comprises an insurance company.

8. A method of managing combined life insurance and annuities for a group of insured persons using a computer system including a database and communications software to permit the computer system to receive data from and to transmit data to various external entities, the method comprising the steps of:

(a) having arranged financing and having incurred certain repayment obligations concerning said financing, and having input data concerning the amount of said financing and said repayment obligations into said database;

(b) having acquired through a first entity at least one annuity for each insured person using a portion of said financing, wherein the first entity is owned by a second entity that has tax-favored status, and wherein each annuity provides an income stream that is allocated to the second entity so that it receives tax favored treatment and having input into said database information concerning the income stream of each annuity and the allocation thereof to the second entity;

(c) having acquired at least one life insurance policy for each insured person, the at least one life insurance policy being acquired by a set of third entities, wherein the owner of each third entity has an insurable interest in one of the group of insured persons, and each third entity has acquired at least one life insurance policy on the life of the insured person in which its owner has the insurable interest, whereby each said life insurance policy has associated therewith premium payment obligation to pay a premium on a regular basis, and wherein each third entity is capable of shielding the insured person on which it has acquired life insurance from liability for the financing and from taxes for that insured person; and

wherein a portion of the financing has been used to pay at least one premium for said at least one life insurance policy and having input into said database information concerning said premium payment obligations for said at least one life insurance policy;

(d) receiving and tracking, via the computer system, information concerning, the income streams relating to the annuities, the financing, and the at least one life insurance policy and maintaining information pertaining to the income streams in said database;

(e) distributing, via the computer system, the income streams from the annuities to pay the premiums for at least one life insurance policy and to pay the interest and principal on said financing based on the income stream information; and

(f) updating the database of the computer system upon each such distribution of the income streams to reflect each such payment of a premium for said life insurance policies and each such payment of the repayment obligations for said financing.

9. A method of managing a group of insured persons using a computer system including a database and communications software to permit the computer system to receive data from and to transmit data to various external entities, the method comprising the steps of:

(a) acquiring or having acquired through a first entity at least one annuity for each insured person, wherein the first entity is owned by a second tax favored entity and wherein each annuity generates income;

(b) allocating said income from each annuity to the second entity so that said income receives tax favored treatment and tracking said allocation of said income using said database;

(c) acquiring or having acquired at least one life insurance policy, the at least one life insurance policy being acquired by at least one third entity, wherein the at least one third entity acquires or has acquired at least one life insurance policy on the life of one of the group of insured persons, and the at least one third entity is organized in a manner to shield the insured person on which it has acquired life insurance from taxes on the said income from the annuity acquired for that insured person and wherein each life insurance policy has associated therewith a premium payment obligation to pay a premium on a regular basis;

(d) receiving and tracking, via the computer system, information concerning said income relating to the annuities and the life insurance policies and maintaining information pertaining to said income in said database;

(e) tracking and maintaining, via the computer system, the premium payment obligations of each third entity for each life insurance policy; and

(f) monitoring and executing via the computer system, the distribution of at least a portion of said income to pay the annual premiums for the life insurance policies.

10. A method of managing combined life insurance and financial instruments for a group of insured persons using a computer system including a database and communications software to permit the computer system to receive data from and to transmit data to various external entities, the method comprising the steps of:

having arranged for an influx of capital from a source of capital, wherein said source has imposed certain repayment obligations concerning said capital, and having input data concerning the amount of said capital and said repayment obligations into said database;

having acquired at least one financial instrument providing an income stream for each insured person using a portion of said capital, the ownership of the financial instruments being structured in a manner such that the income stream of each said financial instrument receives tax favored treatment;

having input into said database information concerning the income stream of each said financial instrument;

having acquired at least one life insurance policy for each insured person, wherein a portion of said capital has been used to pay the initial premium for each life insurance policy, and wherein the ownership of each life insurance policy is organized in a manner to shield the insured persons from liability with respect to said source of capital and from any taxes on said financial instrument acquired for that insured person, and whereby each life insurance policy has associated therewith a premium payment obligation to pay a premium on a regular basis;

receiving and tracking, via the computer system, information concerning the income streams relating to said financial instruments and maintaining information pertaining to the income streams in said database;

tracking and maintaining, via the computer system, the requirements concerning said capital from said source of capital;

tracking and maintaining, via the computer system, the premium payment obligations of each third entity for each life insurance policy; and

monitoring and executing, via the computer system, the distribution of the income stream of each financial instrument to pay the annual premiums for the life insurance policies and to repay said source of capital.

11. The method of claim 10, wherein said source of capital comprises financing from a commercial lender.

12. The method of claim 10, wherein the financial instrument comprises an annuity.