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Captive Insurance Companies… Big Tax Benefits for Smaller Businesses


Big business enjoys huge tax advantages by creating Captive Insurance Companies. Successful PCs can also use this powerful tool for wealth accumulation and risk management.

Keego Harbor, Michigan. May 11, 2007 – In 25 years of developing asset management plans for physicians and other entrepreneurs, Keith L. Mohn, CLU, CHFC has seen every financial planning technique. He helps PCs achieve their wealth accumulation and transfer goals with the “captive insurance company (CIC).”

“Captives aren’t for everyone,” emphasizes Mohn. “But for PCs fitting a certain profile, a CIC may be the ‘Holy Grail’ of planning.”

Ideal candidates -- successful owners/professionals with predictable annual profitability of $500,000+-- can deduct up to $1.2 million annually; convert current income into capital gains; create tax deductible war chests against business disasters; self-insure risks with pre-tax dollars, knowing funds are inaccessible to creditors/owners

The CIC underwrites risks of companies owned by the same owner(s)--risks associated with the practice or medical facility that are not easily or cheaply covered by commercial insurance.

Risks that may be covered by a CIC:
• Administrative Actions
• Computers, Data Recovery
• Key Employees
• Employee /Executive/Professional Liability
• Business Income Loss
• Litigation Expense
• eCommerce Risk
• Directors/Officers
• Kidnapping/Ransom
• Sexual Harassment
• Income Tax Indemnity
• Deductibles/Gap Coverage

Policies can be labeled “litigation expense only”—creating a pre-tax war chest to fight lawsuits, while protecting assets against claims. “Premium dollars” are moved out -- away from creditors. Because premium payments are made “for value” it’s difficult for creditors to prove fraudulent transfer.

• Better statutory protection for reserves due to requirements to pay claims. Creditors are less likely to force judgments.

• When no longer useful, captives can be terminated, assets distributed, capital gains declared, taxes paid -- providing optimum tax benefits.

• Captives formed under 831(b) have straightforward tax reporting -- like a simple “S” corporation. Smart entrepreneurs engage professionals experienced in this section of the code to ensure compliance.

The properly structured CIC is a powerful planning tool for the right business. Compared to traditional retirement plans, captives offer improved tax benefits, asset protection, wealth accumulation and wealth transfer,

Keith L. Mohn, CLU, CHFC -- financial consultant, lecturer, charter member of Wealth Preservation Institute, President Benefit Solutions Group. LLC, in Keego Harbor, a full service financial consulting and planning firm specializing in high net worth individuals, business owners and medical professionals since 1983. For information on planning strategies, email or visit


Adrienne Lenhoff Wise


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