Business pays deductible premiums to owner-controlled captive — up to $2.85M/yr tax-free receipts.
IRC §831(b) allows a small insurance company to elect to be taxed only on investment income (not premium income) up to $2.85M/yr (2025 indexed). Operating business deducts real-arms-length premiums to the captive; captive accumulates reserves tax-free and pays out claims. Legitimate uses: cyber, business interruption, warranty, environmental. HEAVILY policed by IRS (Listed Transaction under Notice 2016-66). Requires bona fide risk transfer, licensed captive manager, actuarial pricing.
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Overfund whole life, borrow against cash value at 5–6%, arbitrage into real estate.
Overfund IUL to MEC line — tax-free retirement income via policy loans.
Business pays premium, executive gets death benefit — pennies on the dollar of tax exposure.
Wrap hedge funds/PE inside a tax-free life policy — no LTCG, no ordinary income.
Borrow at SOFR+1.5% to pay life insurance premiums, arbitrage against policy crediting.
Layer umbrella and excess policies for $5M–$50M liability coverage at $500–$5K/yr.
Take higher deductibles on rarely-claimed policies; pocket the premium savings.
Company-owned life on a critical exec — cash value grows tax-deferred, death benefit tax-free.