Questions to Resolve Before Supporting a Strategy
A useful review should reveal what the proposal depends on, what could change, and who must act if it does.
These questions help organize a professional review of estate-liquidity funding, insurance and, where relevant, premium financing. They are not a suitability score or a substitute for reviewing the actual arrangements. A sound review can conclude that nothing new is needed.
Start with the need, not the illustration
Identify the obligation, the timing and the party that needs the funds. Separate established facts from estimates. A valuable asset does not necessarily provide accessible cash, but neither does concentrated wealth prove a shortfall.
If insurance is relevant, examine that decision before considering how premiums would be funded. Premium financing is a separate borrowing commitment, not a complete estate-liquidity strategy.
Ten questions for the review
1. What problem is the proposed strategy solving?
Who identified the need, and what supports the amount and timing? Which assumptions came from counsel, the CPA, the client or an insurance proposal? Identify what is still unknown before treating an estimate as a funding requirement.
2. Which alternatives were compared?
Consider existing resources and coverage, direct premium payment, a smaller commitment and no new transaction. Other funding approaches may also deserve attention from the relevant advisors. Compare costs, access and timing, not just a preferred strategy’s projected benefits.
3. Does the insurance fit the need and the legal arrangement?
What coverage is required, for how long, and at what premium commitment? What underwriting or other approval remains outstanding? Counsel should address ownership, beneficiary arrangements and access to proceeds. The insurance discussion should establish what the contract provides, not assume that its benefit is available to every party who needs cash.
4. Which policy values are guaranteed, and which depend on assumptions?
Identify the relevant guarantees and the conditions attached to them. Ask for current carrier information rather than relying only on a sales summary. Where illustrations include non-guaranteed values, examine a less favorable outcome and the funding needed to maintain the intended coverage. A projection is not a contractual promise.
5. What obligations does the loan add?
If premiums would be financed, identify the borrower, lender, interest basis, fees, maturity, renewal conditions and reporting duties. What requires current cash, and what may be added to the balance? Check actual terms and approvals; an intended insurance duration is not a lender commitment for the same period.
6. What collateral could be required, and who can provide it?
What assets will the lender accept, how will they be valued, and are they already pledged or needed elsewhere? Under the proposed terms, what could trigger a request for more collateral or repayment? Establish who has authority to pledge assets and how quickly a request would have to be met.
7. Can the arrangement withstand several unfavorable changes together?
Consider higher borrowing costs alongside lower non-guaranteed policy values and less available outside liquidity. What would need to be paid, sold or changed? Identify who can perform the necessary analysis. A discussion of adverse conditions is not proof that a model has been run or that the arrangement has passed a stress test.
8. How would the debt be repaid if the preferred exit were unavailable?
Test the timing and availability of the proposed repayment source. What if a sale is delayed or another lender declines to refinance? Do not assume the insured will die before the loan is due. If policy value is part of the plan, establish the amount actually available and the effect of using it. Lender requirements differ.
9. Who is paid, for what work, and when?
Understand each participant’s compensation and financial interests. Ask what costs remain under the alternatives, including no new transaction. A recommendation deserves scrutiny regardless of whether the client receives a separate planning invoice.
10. Who owns each decision and the continuing review?
Identify who establishes legal authority, tax assumptions, insurance terms and any credit conditions. Who can approve implementation? Afterward, who obtains updated information, reviews changes and brings a decision to the authorized person? Agree on scope and timing; don’t assume that everyone participating in a meeting is monitoring the arrangement.
Make unresolved issues visible
A short record can distinguish what is known from what still needs an answer:
Record | What it should make clear |
Fact or assumption | Its source, date and any limitation. |
Open question | The professional or party responsible for answering it. |
Decision | Who has authority and what information they need first. |
Review responsibility | What is being reviewed, by whom and under which agreed scope. |
This is a way to organize a discussion, not a promised SPF report or professional certification. The questions are not exhaustive, and answering them does not establish that a strategy is suitable.
When the right next step is to pause
An unresolved insurance need, uncertain authority or repayment dependent on optimistic assumptions deserves attention before implementation. So does a commitment that could consume funds needed for other obligations.
The outcome may be more information, a simpler approach, or a decision not to proceed. Completing a checklist should not create pressure to buy a policy or take a loan.
For a fuller explanation of the downside, review premium-financing risks.
Where Marc fits
Marc Setton contributes an insurance-focused estate-liquidity perspective. Legal, tax and investment advice stay with the relevant professionals. The carrier controls coverage approval and policy terms; the lender controls its credit decision and loan terms.
Marc does not charge a separate planning or advisory fee for this work. He is compensated when an insurance transaction is implemented, under the applicable insurance compensation arrangement. That financial interest should be understood before proceeding.
If an insurance-related question remains, you can discuss it before deciding whether client involvement makes sense. Keep the initial inquiry general; do not send client names or confidential records. Further work requires agreed scope, authorization and information handling.