STRUCTURED Financing
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STRUCTURED Finance
Optimize Your Estate Planning with Structured Financing
Structured financing enables high-net-worth individuals and businesses to leverage their existing assets as collateral to fund large life insurance policies—without liquidating those assets. This approach supports estate liquidity needs, business continuation, and supplemental retirement planning objectives.
Charter Oak Financial Group, Inc. is a preferred partner of Opus Funding Partners, one of the largest insurance financing groups globally. Together, we offer customized structured financing solutions that utilize the capital markets to deliver low-cost debt pricing.
Secure Your Future with Expert Financial Solutions Today!
How It Works
Establish Issuer and ILIT or LLC:
Opus Funding Partners facilitates the issuance of a VRDO (Variable Rate Demand Obligation) Note and an ILIT (Irrevocable Life Insurance Trust) or an LLC (Limited Liability Company), designated as the owner and beneficiary of the policy. An ILIT is established for the purposes of eliminating Estate Taxation of assets owned by the Trust. An LLC is established for the purpose of creating supplement retirement.
Variable Rate Demand Obligation (VRDO) Funds Policy Premiums:
Opus Funding Partners accesses the capital markets by issuing Variable Rate Demand Obligation (VRDO) notes that are credit-enhanced through a Federal Home Loan Bank (FHLB) “Letter of Credit” and subsequently rated by S&P. VRDOs are used by large corporations as a way to secure a loan or as the underlying asset that generates the funds for the loan. This structure offers our clients institutional-grade stability and highly competitive financing rates that typically track the 30-day SOFR.
Collateral Is “Pledged,” Not “Liquidated”:
Clients retain all interest and/or appreciation associated with the “Pledged” asset’s value. For example, a client can continue to earn rental income from his or her rental properties or income from his or her bond portfolio while using these assets as collateral on a policy. Acceptable gap collateral includes, but is not limited to cash, stock/bond portfolios, and real estate (valued at approximately 70–75% of its appraised value).
Securities Sale:
The VRDO notes are then sold to institutional investors and money market funds.
Premium Payment:
Proceeds from the VRDO notes are distributed to an ILIT or LLC to pay the policy premiums.
Beneficiary Benefits:
Upon the client’s passing, policy proceeds are paid to the beneficiaries of the ILIT Income and Estate tax-free, after repaying the financing institution. In an LLC, annual distributions are Income tax free and net policy proceeds are Income tax free to the beneficiaries.
Additional Benefits
Limited Recourse Financing:
Client liability is limited to the “Gap” collateral. This “Gap” is defined as the difference between the total amount financed (including interest and related expenses) and the cash value of the life insurance policy. As the policy matures over time, the collateral requirements are no longer necessary.
Off-Balance-Sheet Transaction:
The pledged collateral is typically disclosed as a footnote rather than a liability on the client’s balance sheet. Our clients are not liable for the loans funded by the VRDO to pay the premiums. Clients are ONLY liable for the Gap collateral.
Preservation of Unified Credits:
Because the life insurance premiums are financed, the client’s Unified Credits (Estate Tax exemption) remain intact. Unified Credits are used to reduce any Estate Tax liability. This structure allows our clients to maintain these credits, which would traditionally be reduced by premium payments. The current Estate Tax exemption (Unified Credit) is $30,000,000.
Stability and Security:
Our financing solutions feature stable margins and long-term debt maturities. The cash values in the Life policy are linked to the performance of the S&P Index but are “Collared”. “Collared” means that the annual performance is limited by a Cap and the annual guaranteed Floor is 0%. Our client “Participates in the Market without taking Market Risk”. This cash value philosophy aligns with the enduring/safe nature of life insurance policies.
Reduced Structure and Renewal Risk:
Life insurance policies and financing strategy are designed to offer flexibility, which mitigates market risk and volatility. Our funding structure is issued under a revolving 50-year term, reducing exposure and renewal-related uncertainty.
Tax Advantages:
Clients receive Income and Estate Tax Free Benefits at their passing. They also benefit from tax-deferred growth and tax-free income while living. This promotes significant long-term wealth and tax leveraged income creation.
Estate Planning Efficiency:
Structured financing allows clients to preserve liquidity while ensuring estate planning objectives are achieved. This strategy facilitates efficient wealth transfer with minimal disruption to current financial standing.
Expert Management:
Opus Funding Partners – the global leader in Structured Financing – have chosen to partner with Charter Oak Financial Group, Inc. to provide experienced professionals that manage every aspect of the structured financing process—from bank negotiations to policy implementation and administration—ensuring optimized financial outcomes.
REQUEST YOUR INITIAL CONSULT TODAY!
(860) 276-1091
info@cofginc.com
Monday - Friday
09:00 am to 06:00 pm
Office Locations
Southington, CT
Dunedin, FL
WHY CHOOSE US?
Long-Term Flexibility
Our financing matches the long-term nature of life insurance plans with a long-term debt maturity and flexible repayment terms, reducing policy renewal risk.
Cost-Efficient Financing
By issuing Variable Rate Demand Obligation (VRDO) Notes, we access the same cost of capital as Fortune 500 companies, offering a more economically efficient financing strategy.
Limited Recourse Financing
Our program provides limited recourse financing with stable margins and up to 10 years of Structured financing, ensuring timely premium payments and eliminating the risk of losing market-linked performance.
Minimal Collateral Requirements
Clients pledge only the “Gap” collateral, typically 15-30% of the policy’s face amount, which is reduced and released over time, providing an advantageous arbitrage between policy earnings and debt costs.