Business Innovators Radio - Interview with Chuck DeLadurantey Discussing Premium Finance Life Insurance

Episode Date: February 18, 2025

Mr. DeLadurantey has provided consulting services to several verticals, including manufacturing, healthcare, and supply chain firms. In 2019, he became a. His mission is to help individuals and businesses understand the options for wealth building, retirement pension systems, and private financing available through uniquely designed products with an underlying life insurance and annuities base. Chuck and Michelle, his wife of 50 years, live on his ranch in Luling, Texas, where they raise beef cattle and enjoy hosting fun family events for their children and 26 grandchildren.Learn more: http://www.privatefamilybanking.com/chuck-deladuranteyAll content is for education, discussion, and illustrative purposes only and should not be construed as professional financial advice or recommendation. Should you need such advice, consult a licensed financial or tax advisor. No guarantee is given regarding the accuracy of the information on this channel. Neither host nor guests can be held responsible for any direct or incidental loss incurred by applying any of the information offered.Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-chuck-deladurantey-discussing-premium-finance-life-insurance

Welcome to influential entrepreneurs, bringing you interviews with elite business leaders and experts, sharing tips and strategies for elevating your business to the next level. Here's your host, Mike Saunders. Hello and welcome to this episode of influential entrepreneurs. This is Mike Saunders, the authority positioning coach. Today we have back with this Chuck DeLauderante, and we'll be talking about premium finance life insurance for the ultra high net worth individuals. Chuck, welcome back to the program. Well, glad to be back with you, Mike. It's a fine day here.

I'd love to talk about this topic of premium finance life insurance. You know, whenever I start a conversation like this, I always like to put myself in the position of someone going, what is that? So before we get into like benefits and strategies and things like that, let's define what is premium finance life insurance. Yeah, and it's kind of a funny term in the short, PLFI premium finance life insurance, you know, PFLI rather.

And so this came out of some concepts that have really been further enriched over the years where it can be targeted on high net worth or ultra high net worth people, but not necessarily. And I'll talk about that as we go through the interview. But in its most leveraged form for those high net worth. high net worth and ultra high net worth people, what you're doing is using other people's money. So I say what? So what we do, it just structure in the most leverage way.

And this can be a result in multiples of death benefit that a person would never imagine. So it is a life insurance product. And what we do is in the one scenario for the wealthy, we will use a bank, and we have lots of partnerships with banks to loan millions of dollars to pay people. premiums that will grow and with some risk and in some volatility, but we'll, you know, in the long run with our modeling, we know where the safe zone is and work with the carrier to create enough cash value to pay that loan off and still leave multiple multiples of death benefit for that wealthy person to one, maybe pay that high estate tax bill, the death tax, if we like to call it,

or leave charitable contributions five to 10x times what they would have. So that's sort of the big idea. That's the Mercedes Cadillac version of premium finance life. Yeah. So when I hear that, I wonder if this is an accurate statement. The term arbitrage comes to mind. So does it have anything to do with, hey, I want to get this, you know, high-end life insurance product? And I might be able to afford the premiums, which are higher, but that would impact my cash flow. So I'm going to go ahead and borrow it, put that into this, and yeah, I'm going to make the payments on the loan, but the arbitrage, the end result benefit is going to be greater than this actual loan that I got. Is that a fair consideration? Well, here's the deal. There's nothing for free, and that's what I want to just sell right away. So though you're not putting any balance sheet money cash in or your P&L cash into the policy,

it's in the ultimate, and there are ways to modulate that where you can pay some and borrow some, but let's just go with that first case where it's all borrowed money. You have to at some point post some collateral. So the bank's not going to make, the banks love these loans because they're backed by the death benefit. They're going to get paid. But in the interim, before the cash value catches up in the, the early years, there has to be some posting of collateral. So that's just a posting of real estate or cash assets or whatever, where if you want to walk away, the bank's going to be made

whole. And most people don't walk. If this is properly done, they're not going to walk away from this. So, but the bank wants to know no matter what, they're going to get their money. That's a bank. You know, everybody knows the bank always wins. And so, so there is maybe some posting of some collateral, some assets, whether that stocks, bonds, cash, real estate, equity. whatever, and there's letters of credit we can get that'll suffice for the loan. So, so they're in that, that collateral goes away after maybe five, seven, eight, at the most, usually 10 years. And then it's just a winner all the way where that policy is generating enough growth in the cash value to pay off the loan and then so.

Yeah. That's perfect. And like I said in the opening, you know, you're talking about this for ultra high net worth individuals. and the reason that you're positioning it that way is because it is a more advanced strategy and someone that doesn't have ultra high net worth might not be in the position to kind of put that into place. So kind of define why that's the case. Well, again, the banks want to know that this person has the ability to perform their

part of the deal, if you will. So it's just that the way things work out, these things, get pretty amazingly powerful. Where, again, in the charitable mode, so you don't have to do charity with it, but if you want to do charity giving and multiply your current giving and future giving, it has a huge impact.

And then in some examples, we're generating $30 million worth of death benefit, which, as you mentioned, a person may never go out and buy that on their own, especially in a cash value or a, and we use an IUL, which is an index universal life. So it is a permanent life insurance product. And so it's getting returns.

And so they split that death benefit. Part of it goes to charity to avoid taxes. And then the rest of it can help pay that estate tax so your children don't wind up having to sell your business when you exit the earth or go on to futures. So it's a great, it's a great offset there. But there are ways, if you have $5 million of net worth, we can work with people. in that category a little differently where they may put some sweat equity and pay some premium upfront and then maybe a few years and then wean off and do all of the financed premium.

We even work with people that have high incomes and maybe not, maybe a couple million dollars in assets and we're kind of just putting that together with some new product design. So there's all kinds of entry points. Many, many people in the premium finance life do focus on those of $10 million net worth or more. So you mentioned charitable giving a couple times. Talk a little bit about that strategy and how it is used to reduce taxes, of course, to support causes you care about too. But there's that dual benefit. So how does that factor into something like this with premium finance life insurance? Because you don't normally think about getting life insurance, benefiting a charity, and reducing taxes all of the same breath. Right, right. And it's not so much reducing the taxes. is building a pot of money to pay those taxes rather than the estate at the end of your life, your kids having to wind up or whoever you're taking over your business,

figure that out of current cash. And the charitable giving is just a way. So the way we can increase charitable giving substantially is to use a form of this product that's in life insurance, permanent insurance, generally is called a mech or a modified endowment contract. So when it's a modified endowment contract, we need that charitable component to avoid taxation on the gains. So that's why that is. And it becomes quite substantial. It's very, very normal to have a, you know, a 10 or 15 million dollar endowment amount that you can give. And these are people who are giving to, you know, their church, health care organizations, their college, their

alma mater. They get their name on a building or whatever. They, you know, they're doing projects overseas, wherever they want to send that money in a charitable way. It's very exciting for some of these wealthy families. Yeah, and it's way different than just going, oh, I want to give X. Here's a check. Yeah, much different. Absolutely. Yeah.

Much different. So you've talked about mitigating or minimizing tax liability for maybe your heirs in that legacy wealth transfer. talk a little bit about how people should be thinking about that because I feel like a lot of people, you know, in their striving years, they're just trying to make ends meet. Then I just want to plan for retirement. But we're talking about people that have enough to get way past that. Now they're like, okay, there's money left over or opportunities left over.

I'm going to be passing this along to my errors. How do I make sure that it's passing properly? Well, you know, I think, you know, every wealthy person probably has a C. probably an attorney, maybe they've done some legacy estate planning. We work alongside those. We do have relationships with attorneys and tax professionals as well if they need that. You know, you would be surprised how many people that I've met in my course of work would have, you know, 20 million in that network, 25 million, and really don't have an estate plan put together. They don't have a succession plan.

And so it really starts with a family philosophy. We like private family banking is our name. And we're big about the family office and creating a family charter and how to do all that. We provide those services as well. Because if you don't lay out the behaviors and what your expectations are, the money is just numeric. But what about who are we as a family? What's the legacy? What do I want things to look like in a future to on my children, grandchildren and great-grandchildren?

So it really creates a conversation about family planning first and then a financials follow. Yeah, that's a really good point. it's kind of like a recipe. You know, every ingredient is needed, but you might need to put one ingredient in earlier than the other or wait a little bit longer and then it's got to come together that way. I think that sometimes people have misconceptions or they make mistakes, kind of like that order. What are some of those mistakes that people typically make when planning this way for their state? And maybe it results in an unexpected tax burden for their kids. Oh, totally, totally. You know, I was in Michigan some years ago, and we were in a very beautiful farm-type community with some people, very successful businesses there for, you know, 80 years. And the lady was in 95 years old. And she died and left this huge business to her children, but no tax planning. And they want to getting this huge tax bill. And this was a staple. You know how people name it.

their business with their last name and everything. Yeah. Been there for, you know, everybody in the community knew this business. It was just still thriving. They had to sell the whole thing because they couldn't afford to pay the taxes. It was sad. It's really sad. So this is a tool to avoid that. And I think you can go beyond that. Again, every case is, is unique. First of all, the family philosophy, the, you know, the beginners, the parents usually who've started this business. You know, we want to get to know them. We want to build a trust. And then we need to have those bigger conversations. And, you know, sometimes a family is not all together. And there's some, some family hardships and

exchangements that happen. And those all have to be taken into consideration too. So there's lots of things to consider. And again, those folks usually have a trusted advisor and we'll work right alongside them. But that advisor may not know anything about premium finance life. Yeah. You know, let's get back to that term premium finance. Anytime I hear the word finance, that means loan and there might be, you know, paperwork and costs. What are some of those costs like interest rates or fees or premiums that might be involved in setting this type of thing up? And how does that balance with what you're trying to accomplish? Right. And so that's all included in the product design. And it's, it's somewhat complex until we get some numbers and sit down and walk through how the money works and

flows and what those fees are. It all depends on how we design it. But the way it grows and the way the insurance company works with that money, they're all going to be eventually absorbed or, you know, taken care of. And so there's no out of pocket for, again, if we do in the ultimate sense design this, there's no out of pocket cash for the policyholder for that person. And so that would be the ideal state. But again, other than that posting of collateral. So we go through that in great detail. There are, you know,

nothing is risk-free, but we design it so that it's the best risk scenario. I mean, if you have a, if you're, you know, if you have a very volatile business,

maybe it's not for you. You know, so I'm not saying this is a one-size-fits-all. It's a qualified discussion. So when you talk about risk, because, you know, you can talk all about the great things like in the end result,

you're going to have XYZ, but there always are those risks or contingencies. What are some of those, those risks if the underlying policy, the IUL or the life insurance policy, doesn't perform as expected. Right. So those risks are generated mostly by interest rates and what the returns are. And so we would like to see people with enough liquidity and cash flow in their business and their life that if there became a time where you had a rough patch that they could supplement it a little bit, maybe have to put in a little bit of cash to offset those losses so the thing doesn't fall. collapse upon itself. So there are moments like that, but, you know, depending on my partners and the modeling they do, we have math models and computer models over years and years and years to take

a look at scenarios where it's not, again, we're not just looking at a snapshot, we're looking at a broad-based scenario analysis, simulation, if you will, known also as Monty Carlo analysis, if someone's familiar with that. But it basically is taking the history of, you know, the best period, worst period, of thing, mid-range, and saying, okay, here's the way things that work. Here's, here's some things that could happen. What would we do? And we go over that in great detail. Yep. You know, I've heard of these types of, you know, properly structured life insurance contracts, like what you're talking about, where the scenario is such that you put in X number of dollars a year or a month or whatnot for only a certain period of years. Let's just call it seven as an

example. And then after that, you don't need to put it any more in because it's just going to do the expectations that the calculations are. So, you know, that's all in how you structure that. It makes me think about this scenario where you're adding the extra piece to it, where you're financing enough to be able to get this policy. What happens if someone decides to exit the arrangement early on both sides of the equation? Yeah, that's where the collateral comes in. If they exit too early, the collateral will take care of the loan accrued interest. And so, but, you know, sometimes they're borrowing maybe $3 million a year for three to five years. And then there's no more borrowing.

So it's not like they're borrowing for 20 years. And so, again, the bank buys into this because they know they're covered through that collateral and through the growth in the policy, expected growth. And so, you know, it is a thing that's monitored. Our partners monitor that. we make sure that the thing is the client is well aware of what's going on. And so, but at some point, it's whole. And, you know, maybe it could be as soon as five years, you could walk away and get all

the money back. But in early going, yeah, if you walk away, you're going to have to, you're going to have to bring some money to the table to exit. And just like someone, you, if you were thinking about that, you wouldn't go and make that decision without getting a multitude of. counselors, just like you would not set this scenario up without getting the multitude of qualified counselors. So I think that's something that people really need to realize. And through this conversation, it's making me think of the phrase optimizing opportunities. So these are ultra-high

net worth individuals that they're looking for places. Where do I put my money to best perform to provide all of these things you're talking about? It's not necessarily the person that's like, I need to put a mode around my retirement income so that I can have barely enough money to last through retirement. These are people that aren't thinking that way. They're so far beyond that. So talk a little bit about that mentality of optimizing opportunities. Well, absolutely. I mean, again, if you've been in business long enough and you've been successful, you realize the leverage you can get by using other people's money.

I mean, we all borrow money. You know, we borrow money to buy a house. We borrow money to buy a car. So, you know, going into debt is, you know, I characterize it as good debt versus bad debt. I mean, this is creating an asset class for you called life insurance. It's got a cash value amount and it's going to grow. And then there are nothing as risk free. But it's very, very solid.

It's in a product and with companies that are, you know, been around for a long time. So an experience. But again, it's not for everybody. I think that's the conversation to make sure we wouldn't want to entice somebody to do this. if it's just not going to be good for them. And if they can't, if they couldn't withstand some, you know,

some scenario where maybe things weren't ideal and it's going to be like they're way, way over leverage and we're just not going to, we're not going to recommend it. Yeah. Could you think of a client you've worked with that has put this into place and kind of there before after results? Well, you know,

my partner's been doing this for years. I am representing several large clients. right now in the $15 to $20 million range, they're just getting launched. I would have to refer to my partner's stories, but they have lots of case studies that we have. I send out, you know, people that have endowed lots of money to charitable giving and also protected against that estate tax and some that have just purely created a bucket of money to pass on that they wouldn't have done without using the bank's money. They wouldn't have gone and bought a multi-million dollar of death benefit.

Because really this strategy has been around for hundreds of years. You're just layering in the fact that, hey, if this works at this level, let's amplify it and access some funds by financing it to then have it perform at a higher level. So it's nothing new. Yeah, the product core is nothing new. How we go about it and the order of magnitude and size of it, the scale of it is much different. Yeah. Yeah. Well, it's just similar to going, oh, hey, you should invest in real estate.

and then someone comes along and going, oh, you only own single family residences. You should invest in apartment buildings. Oh, well, the concept's the same, real estate. You're just doing it at a bigger level. That's a perfect parallel analogy. And, you know, you can go and you can buy single dwellings, you know, one door at a time, as they like to say. Or you can get into syndicate and join other people and buy, you know, apartment complex of 500 to 1,000 units. You know, it's awesome.

Yep. Well, this has been really enlightened. I just love your perception of how you're serving your clients and how you're perceiving their needs and meeting them, but doing it all in a logical progression that is putting them first. So any final thoughts, Chuck? And then how can people reach out and connect with you? Yeah, I appreciate the time. No, I think we covered the landscape without a, you know, the real, real numbers and a real person to talk through the details. It's kind of hard to dive down into it.

but I think we covered the high level and the essence of this whole thing. And again, that's not every situation where you're going to borrow all the money to pay the premium. You might pay some of the premium and borrow some of the money and still get the leverage that you want. And again, there are some ways with people, even around the $2 million net worth to get involved in this. And again, it all depends on their acumen, their liquidity and their goals in the future.

I appreciate the time. I can be reached. My email is Chuck. at C-H-U-C-K, Chuck at Private Family Banking.com. That's all one word. You can also reach out to me by direct line is 830-339-9-4-72. Either call me or email me. We'll set up an appointment.

We'll do a discovery call together. I know this involves people sharing intimate details of their finances, so we want you to trust us. We're trustworthy. We have lots of referrals and recommendations we can send. Again, Chuck at privatefamilybanking.com. Excellent. Well, thank you so much for coming back on. It's been a real pleasure talking with you again.

All right, Mike. Thanks a bunch. God bless. You've been listening to Influential Entrepreneurs with Mike Saunders. To learn more about the resources mentioned on today's show or listen to past episodes, visit www. www. Influential Entrepreneurs Radio.com.