Is an IFA Strategy Right for You?

You may have heard of an IFA (immediate financing arrangement) and wondered, “is this the right strategy for me?” To help you answer this question, we’ve created a profile of a suitable candidate for such an arrangement.

Who Is It For?

Generally speaking, an ideal candidate for an IFA is someone between 35 to 55 years of age. They are investment savvy and have an established business with growing revenues. Their business is on a consistent upward financial trajectory and, as a result, they’re accumulating excess revenue which can be invested.

In short, an IFA is optimal for someone who is running a financially successful business, planning on working for a while, and doesn’t need the excess revenue for their business and, in turn, are able to invest it.

Does it Meet My Needs?

People who are best suited for an IFA have life insurance needs. These insurance needs are generally in the form of a Key Person and/or a Buy-Sell Arrangement.

Key Person Insurance is life insurance on the key person in a business, generally the owner, the founders or a key employee.

A buy-sell Agreement is an agreement between co-owners of a business that governs the situation if a co-owner dies. This is a way you can finance the buyout of a deceased partner, to insure, for instance, that you don’t become partners with your recently deceased partner’s spouse.

To qualify for insurance, it should be noted that a pre-assessment of health is required. As the insurance is being used primarily as a “wrapper,” to make their corporate assets work, they are only required to be in reasonably good health–not perfect or phenomenal.

Common Questions

Those who are interested in an IFA often ask the following questions:

•  Is it better to rent term insurance or own permanent insurance?
•  Are there ways that I can be running my business more tax efficiently?
•  In light of the new 2017 tax laws, are there things I should be doing differently or be made aware of, as a result of those changes?

Why Might an IFA be Suitable for Me?

With an IFA, you can:

•  Buy and own your insurance instead of renting it
•  Use the corporate insurance to house your investment dollars, gross tax-free
•  Leverage off that corporate insurance asset to continue to buy real-estate, investment portfolios and other alternative investments
•  Achieve tax efficiencies and savings, particularly in light of the 2017 tax changes

Further to the above reasons, you will also have put into place a powerful tool for your estate plan, even if that’s not a focus for you right now. 

Contact MGF

Please contact me for more information on how IFA works, and whether it’s right for you. I’m looking forward to being a part of your professional advisory team in order to help you create your best financial plan.

Marco Faccone, CPA, CA, CFP has long specialized in the area of corporately held insurance and estate planning, advising and assisting shareholders with succession and wealth accumulation strategies. Marco has worked alongside estate lawyers and tax accountants to offer his clients a professionally tailored and value-added plan. Contact MGF Advisory for more information regarding corporately held insurance and succession planning.

Categorised in: Business Planning

This post was written by Marco Faccone