Self Insurance Options

Without Captive                                                                           With a Captive
Pretax Surplus Earnings                     $1,200.000                Pretax Surplus to a Captive $1,200,000

Tax on Ordinary Income @40%          ( 480,000)               Tax on Ordinary Income 0% 0

After Tax Money Before Expenses          720,000                  After Tax Money Before Expenses 1,200,000

Less Captive Expenses                                              0                 Less Captive Expenses (100,000)

Net before claims                                        720,000                  Net before claims 1,100,000

Interest Income @ 4%                                   28,800                 Interest Income @ 4% 44,000

Less Tax On Interest Income @40%* (     11,520)                Less Tax On Interest Income @40%* ( 17,600)

Funds Controlled By Owner                  $ 737,280                 Funds Controlled By Owner $ 1,126,400

……………………………………………………………………….

*Assume higher tax rate on interest for “wealthy” after expiration of Bush Tax Cuts After 2012

** Funds ultimately distributed fm Captive Insurance both deferred & eligible for cap gains treatment

 

 

One Response to Captive Insurance Illustration

  1. Tyler says:

    You’ve really captured all the essetnails in this subject area, haven’t you?

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