Client Profile:
A senior executive earning over $1 million annually wanted to reposition part of his annual bonus into a personally controlled, tax-advantaged structure that could grow efficiently, provide liquidity in retirement, and create a lasting family legacy. He had already maximized his qualified retirement plans and deferred-compensation options, but those programs offered limited flexibility and kept assets tied to his employer’s performance.
He was looking for something that gave him ownership, privacy, and control — a structure where his money could compound tax-efficiently and remain accessible on his own terms.
The Challenge:
Like many high-income professionals, this client faced the tax drag dilemma — nearly half of every bonus went directly to taxes before he could invest a single dollar. The remainder sat in employer-controlled accounts with strict access rules and no guarantees. While his income was strong, his wealth structure was inefficient.
He didn’t need higher returns — he needed a smarter framework to make his existing income work harder. The goal was simple: take a portion of his current bonus and turn it into a permanent, tax-free wealth engine, without adding risk or complexity.
Our Solution:
RM Legacy Group designed a personally owned Indexed Universal Life (IUL) policy funded through an Executive Bonus (§162) Plan — a compliant, time-tested strategy that allows employers to pay premiums as part of executive compensation.
Here’s how we restructured the plan to maximize impact:
- Tax-Advantaged Funding: The employer continued paying the same bonus, but instead of it being fully taxed and deposited into a standard account, the funds were used to pay premiums into the IUL. The executive recognized the income as usual, but once inside the policy, it grew tax-deferred and could later be accessed tax-free through structured policy loans and withdrawals.
- High-Efficiency Policy Design: We engineered the policy with minimal internal costs and an optimized balance between base insurance and indexed components — maximizing long-term accumulation while maintaining flexibility.
- Institutional-Grade Allocation: The strategy blended several indexed crediting options — including the S&P 500, volatility-controlled indices, and international strategies — providing growth potential while mitigating downside exposure.
- Liquidity and Legacy: The structure allowed the executive to build tax-free income access in retirement while maintaining a multi-million-dollar tax-free death benefit for his family.
This approach transformed what was once a fully taxable bonus into a strategic, tax-advantaged asset — aligning wealth creation with control, protection, and purpose.
Outcome
Over the same timeline, the restructured plan is projected to deliver:
- More than $5.2 million in future tax-free retirement income
- A $9 million legacy benefit for his heirs
- Full ownership and access, independent of employer restrictions
The executive gained true autonomy. His money now compounds quietly and efficiently in a private, tax-free structure that he controls — insulated from corporate changes, market volatility, and unnecessary tax exposure.
At RM Legacy Group, we believe the difference between good planning and exceptional results lies in how dollars are structured, not how much is earned.
Through strategic design and disciplined execution, even a single bonus can be transformed from a taxable event into a lifelong, tax-free asset — creating wealth that grows, protects, and endures.