Six famous brands started or saved by Life Insurance

Six famous brands started or saved by Life Insurance

By Brian Anderson

 

If not for life insurance, Disneyland might have existed only in Walt’s imagination. Stanford University might have been a short-lived tribute to a son who died young. James Cash Penney’s personal depression during the Great Depression might have shuttered the J.C. Penney chain. McDonald’s might have only served a few hundred thousand. Today’s home chefs might not be getting pampered.

Check out this slide show to learn how life insurance played a key role in either the creation or survival of some iconic American institutions.
 

Disneyland

Walt Disney Studio was founded in 1923 in Los Angeles by Walt Disney (1901-1966) and his brother Roy. After a distributor essentially stole one of his early cartoon characters and his animators, Walt made sure he owned everything he made after that. Mickey Mouse debuted in 1928 and became an immediate sensation as the star of the first cartoon with synchronized sound.

His animated features and, eventually, television programs achieved steady success, and by the 1950s, Walt became intrigued with creating an amusement park where parents and children could have a good time together. At the time, the only amusement parks in the country were dilapidated places with seedy characters, but Disney dreamed of an immaculately clean, family oriented park with imaginative attractions.

After failing in the pursuit of traditional means of financing to build what would become Disneyland, Walt decided to provide his own financing. A large part of this came to be by collaterally borrowing money from his cash value life insurance. Disneyland opened in 1955 and hosted more than 3.5 million visitors in its first year. It became an immediate, resounding success.

Disney is quoted as saying that money was the biggest problem he faced throughout his life, and that was certainly the case with Disneyland. “It takes a lot of money to make these dreams come true. From the very start it was a problem. Getting the money to open Disneyland. About $17 million it took. And we had everything mortgaged, including my personal insurance… We did it (Disneyland), in the knowledge that most of the people I talked to thought it would be a financial disaster — closed and forgotten within the first year.”

McDonald’s

Working as a milkshake machine distributor in 1954, Ray Kroc (1902-1984) took notice of a successful hamburger stand in San Bernardino, Calif., which he called on, intending to sell brothers Dick and Mac McDonald more Multimixers. He learned they were interested in a nationwide franchising agent. Kroc, 52 at the time, decided his future was in hamburgers and partnered with the brothers. He opened his first McDonald’s in Des Plaines, Ill., in 1955 and bought out the McDonald brothers in 1961.

Kroc did not take a salary during his first 8 years, and to overcome constant cash-flow problems, Kroc borrowed money from two cash value life insurance policies (and also his bank) to help cover the salaries of key employees. He also used some of the money to create an advertising campaign around emerging mascot Ronald McDonald.

Using a progressive franchising arrangement and striving for consistency and standardization throughout the chain, McDonald’s grew to more than 700 restaurants within 10 years. Today, McDonald’s serves more than 50 million people each day through more than 30,000 locations in 119 countries.
 

Stanford University

Pacific Mutual Life (now Pacific Life) ceremoniously issued its first policy to Leland Stanford, the company’s first president, in 1868. After his son, Leland Jr., died of Typhoid Fever in 1884 at the age of 15, the former California governor and U.S. senator and his wife, Jane L. Stanford, determined that because they could no longer do anything for their own child, they would use their wealth to do something for other people’s children. With a strong belief in the importance of a practical education for men and women that would prepare them to be productive and successful, six years of planning led them to establish Leland Stanford Jr. University in Palo Alto in 1891, with a pioneer class of 555 students (including Herbert Hoover).

Following Leland’s death in 1893, the fledgling university’s financial support became uncertain, to the point where Jane tried unsuccessfully to sell her treasured jewel collection in 1897. Intent on preserving the university and avoiding a “temporary” closure, she used her husband’s life insurance policy proceeds to help fund operations and pay faculty, allowing Stanford University to weather a dangerous six-year period of financial distress.
 

J.C. Penney

In 1898, James Cash Penney was working in a Golden Rule Store, part of a small chain of dry goods stores. He was such an enterprising worker that the pair of owners took him under their wing, offering him a one-third partnership in a new store they were opening in Kemmerer, Wyo. Penney participated in opening two more stores, and when the original partners dissolved their partnership in 1907, Penney purchased full interest in all three stores. By 1912, he operated 34 stores throughout the Rocky Mountain region. In 1913, he moved the company to Salt Lake City and incorporated it as the J.C. Penney Company. By 1929, there were 1,400 stores across the country.

The stock market crash of 1929 and the ensuing Great Depression devastated the stores and Penney’s personal wealth. The financial setbacks also took a toll on his health — physical and mental — but he was able to borrow against his cash value life insurance policies to help the company meet its payroll and day-to-day expenses. This allowed the company to stay afloat and eventually rebound.

Penney became a born-again Christian and remained as chairman of the company’s board until 1946. He served as honorary chairman until his death in 1971. Today, the company’s 1,100 stores take in revenues of $18 billion a year, and the company was able to pay new CEO Ronald Johnson, the former Apple exec who joined the company last November, $53.3 million in 2011.
 

The Pampered Chef

Using $3,000 she borrowed from a life insurance policy, home economist Doris Christopher started The Pampered Chef in her suburban Chicago home in 1980.

All her time working with homemakers convinced Christopher that women needed quality timesaving tools designed to help make cooking quick and easy. She had seen the success of Tupperware’s business model and developed her own detailed multi-level marketing business plan. Using the life insurance money, she purchased some basic inventory and was on her way.

By 2002, the company had grown into a $700 million operation that was acquired by Warren Buffett’s Berkshire Hathaway Corporation for $1.5 billion. Today, the company boasts 12 million customers.
 

Foster Farms

In 1939, a young couple named Max and Verda Foster started Foster Farms by borrowing $1,000 against a life insurance policy. They invested in an 80-acre farm near Modesto, Calif., and began raising turkeys and, eventually, chickens.

By the 1960s, the company had outgrown the original farm and moved its corporate headquarters to the small California Central Valley town of Livingston, where it still resides. Today Max and Verda’s grandson, Ron Foster, is the CEO of the family run business. Foster Farms is now more than 10,000 employees strong, with operations in California, Oregon, Washington, Colorado, Arkansas and Alabama, and has a line of products that are sold globally.

Foster Farms specializes in fresh, all-natural chicken products free of preservatives, additives or injected sodium enhancers. 

Fuente: http://www.lifehealthpro.com/2012/04/06/6-famous-brands-started-or-saved-by-life-insurance

APRIL 6, 2012.

Whole Life Policies: Tapping Cash Value as Alternative to Equity Investing

Whole Life Policies: Tapping Cash Value as Alternative to Equity Investing

By William H. Byrnes, Esq., Robert Bloink, Esq., LL.M.

 

Whole life insurance policies have taken the spotlight as investors seek secure investment alternatives to today’s rocky equity markets. Not only do these policies provide for tax-deferred growth, but they come with many of the guarantees sought by clients today.

The market for these policies is soaring, as clients see them as vehicles allowing for a return on their investment in the life insurance contract without the risks inherent to investing in the open markets. An advisor’s guidance can be critical in determining whether a whole life policy is a smart investment for any given client and can also provide invaluable in navigating the often-complex rules governing the tax treatment of these policies.

The resurgence of whole life insurance

The stock market losses sustained by your clients in the past few years have them scrambling for alternative investment avenues. They simply are not willing to continue to risk their savings in what is often perceived as a volatile (and hostile) investing environment. A whole life insurance policy may provide a safe long-term investment because the investment in the contract grows tax-deferred and often at a guaranteed rate regardless of how the stock markets are performing.

At its most basic level, a whole life insurance policy requires that an investor pay a level premium each year and provides for a guaranteed death benefit on the death of the insured. However, these policies also contain an investment component. A portion of the premiums paid is invested by the company issuing the policy, building cash value in the policy that the insured can borrow against.

Further, many of these policies pay an annual dividend, which is sometimes set at a guaranteed rate over the life of the policy and can be as high as 6% per year. These guaranteed dividends make whole life policies attractive for many investors looking for an income stream from their investments.

It is important to note that a whole life policy is a long-term investment — it may be necessary to pay premiums over a period of 15 to 20 years in order to realize a decent return on the investment.

Accessing the cash value of the policy: Tax implications

The advice of a financial advisor is critical in determining if and when withdrawing against the cash value of the policy is a smart choice. In general, the policyholder can borrow against the accumulated cash value without paying taxes or interest on the amount withdrawn. Of course, there are exceptions and consequences that must be considered when making these withdrawals.

Any withdrawals that are not repaid before the insured’s death will reduce the death benefit payable on the policy, so if the policy is purchased primarily to provide for the policyholder’s beneficiaries, withdrawals may not always be appropriate.

Despite the general rule, withdrawals are sometimes taxable. For example, if the withdrawal is made during the first 15 years of the policy’s existence and reduces the death benefit payable, the amount may have to be included in gross income. Any withdrawal that exceeds the taxpayer’s basis in the policy will be subject to income taxation.

In some cases, if the withdrawal is for more than the policy’s cash surrender value, the insurer can increase the premiums required to maintain the same death benefit under the policy. A substantial increase could cause the policyholder to have trouble meeting premium payments, in which case the policy would lapse and the investment could be lost.

Conclusion

For those clients who continue to shy away from equity investing, a whole life insurance policy can provide a viable alternative by offering guaranteed dividends and tax-deferred growth. It is, of course, important to examine each client’s financial position to determine whether the long-term investment required in the way of annual premiums is the best option in any given situation.

Source: LlifeHealthPRO, 18/07/12.

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About the Author

William H. Byrnes, Esq.

Prof. William H. Byrnes, Esq., LL.M., CWM, Fellow

Prof. William H. Byrnes, Esq., LL.M., CWM, Fellow, is the leader of Summit Business Media’s Financial Advisory Publications, having been appointed July 1, 2010. He has been an author and editor of ten books and treatises and seventeen chapters for Lexis-Nexis, Wolters Kluwer, Thomson-Reuters, Oxford University Press, Edward Elgar, and Wilmington, as well as numerous commissioned, peer-reviewed, and law review articles. He was a Senior Manager, then Associate Director of international tax for Coopers and Lybrand, which subsequently amalgamated into PricewaterhouseCoopers, practicing in Africa, Europe, Asia, and the Caribbean.

He has been commissioned and consulted by a number of governments on their tax and fiscal policy from policy formation to regime impact. He has served as an operational board member for companies in several industries including fashion, durable medical equipment, office furniture, and technology. Since 1994, he has been a professional trainer for professional association conferences, government workshops, and financial service institutions in-house meetings.

Before Associate Dean Byrnes joined the administration of Thomas Jefferson School of Law, he was a tenured law faculty member at St. Thomas School of Law. He serves on the Academic Committee of the American Academy of Financial Management. He created the first online graduate program offered to wealth managers and life insurance producers without any legal background—see http://llmprogram.tjsl.edu (Graduate Program of International Tax and Financial Services, Thomas Jefferson School of Law).

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Whole Life Insurance

Whole Life Insurance is a permanent form of life insurance that will provide a lifetime of protection with a level premium. Depending on the policy that you purchase, a whole life insurance policy can also act as a tax-efficient investment with strong cash values. Whole Life Insurance spreads the cost of your coverage over the lifetime of the policy, which keeps premiums lower than they would otherwise be. Additionally, there is an option to purchase certain Whole Life policies over the course of 10 or 20 years and spend the rest of your life protected.

Tax-Advantaged Investing Using Whole Life Insurance

One of the major features of both Whole Life and Universal Life insurance policies is the idea of having an investment inside the policy that is efficient when it comes to taxes. Whole life insurance in particular can accumulate a so-called cash value on top of its normal cost of insurance. This cash value is an investment component that gains interest at a rate determined by long-term financial projections.

The advantages of using a whole life insurance policy as an investment are many. Whole life insurance offers a very stable long-term investment. While it may not respond as quickly to short-term changes in the marketplace, whole-life insurance is very useful for meeting long-term financial goals because of its stable, guaranteed rate of return. The tax-advantaged aspect of a whole life insurance policy allows you to gain interest on funds you would normally be paying tax on. This allows you to grow your investments more efficiently.

Paying For Whole Life Insurance in 10 to 20 Years or Before Retirement

Basic Whole Life policies spread the payment for insurance over the estimated length of your life. This means that you’ll be paying your premiums even while retired. But as was touched on previously, there are some options when it comes to paying out the entirety of your policy earlier, while you have greater earning potential. The most common options are 10 and 20 year plans, as well as paying until the age of 65. In all cases, these payment plans spread insurance payments out over a smaller amount of time. Ultimately, the shorter the length of time, the higher the premiums, but the positive aspect of this is being done paying for your insurance coverage earlier.

Whole Life Insurance is a very stable, tax-efficient investment tool, as well as an excellent permanent life insurance policy. Whole Life Insurance can fit cleanly into your financial plan, but for obvious reasons the issues of balancing your investments, maintaining a lifestyle and planning for the future are as complex as ever. Because of this, we highly recommend talking with a financial advisor before you buy into a whole life insurance policy, or do any major financial planning.

It Can Happen to You

It Can Happen to You

By Jeff Rose

It’s one of those things that you think will never happen to you.

To walk into the kitchen and find the love of your life lying lifeless on the floor; dead on the cold kitchen tile.

It’s been over three years since I heard this story. A fresh widow sitting in my office clenching the box of tissues that I offered her, sharing her sad story with me.

She had been married to her husband for more than 20 years. They had two wonderful kids and loved spending each day with each other.

The Family Man

The husband was a hard worker. He loved his family and gave each day his all. He had no preexisting conditions. As a doctor himself, he was very conscious of his health and took care of himself.

Stories like this happen more often than we want to believe. You see it in the news, you see it in blogs, you even hear about it on Oprah.

Some of us are lucky. We never have to experience the heartache of losing a loved one before it was time for them to go. I can only imagine how hard it is for someone to go through that. And there is no hiding the pain that I saw in her eyes. But as I mentioned, the husband loved his wife and loved his family and made sure that they were protected.

He did this by taking out a very large life insurance policy.

Having to deal with the pain of losing her husband was hard enough. If she would have had to worry about where her next paycheck was going to come from now that her husband, who was the clear breadwinner of the two, was gone, I think it would have broken her. Thankfully, she didn’t have to worry.

She didn’t have to worry at all.

The husband had realized how inexpensive term life insurance was and bought a lot of it. With the amount of life insurance that her husband had thoughtfully taken out on himself, she and the kids were set.

She wouldn’t have to work again.

Her kids could continue to go to the colleges that they wanted. The family, even without their dad and husband, would be okay financially.

It’s been three years since that unfortunate day, and having a review meeting with that client, she reinforced how thankful she was that her husband had had the foresight to buy the life insurance. She sat in my office and said, “Had he not bought that [life insurance], I have no idea what I would have done.”

So many people don’t feel the need to buy life insurance. In fact, over one-third of the U.S. population has no life insurance in their households whatsoever.

Life insurance is cheap. Life insurance is easy; it literally takes you less than 10 minutes to get a quote. I know because I did it myself. And if you haven’t, you need to.

Don’t you want to leave your loved ones with the financial means to continue without worry if you should leave them before you expect to go?

What are you waiting for?

This is a guest post by Jeff Rose, a Certified Financial Planner and Iraqi combat veteran. He blogs at Good Financial Cents, Soldier of Finance and Life Insurance By Jeff.
Fuente: The LIFE Foundation, 03/08/12.
Más información en: www.lifehappens.org

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