Self-Insurance vs. Captive Insurance
Pre-fund future losses with tax-deductible premiums
capstone newsletteraugust, 2009
Most business owners, knowingly or unknowingly, self-insure a large number of risks. These risks include the many hidden risks that are inherent in the operations of any business, as well as the many risks that are excluded or omitted by conventional insurance policies.
One benefit of owning your own captive insurance company is that it provides the opportunity to pre-fund future losses. With a captive, otherwise self-insured risks can be covered by policies paid for with tax-deductible premiums paid to a captive. If insurance claims are lower than projected, the captive will retain substantial profits that can be distributed to its owners on a tax advantageous basis, or used to pay other claims.
Operating businesses are only allowed to deduct losses as they occur. In contrast, insurance companies are unique in that they are able to currently expense and deduct for future, unspecified losses. With a captive insurance arrangement, those reserves accrue tax-free until the loss occurs, or in the event that the loss does not occur, the profits can be distributed to the captive's owners.
Fortune 1000 Planning TechniquesNow available for the Middle Market
By recent estimates, captive insurance as an alternative risk management strategy is being used by more than 80% of the Fortune 1000 corporations.
Capstone translates the more sophisticated business planning techniques used by large corporations into techniques feasible for use by the middle-market, privately-held company and its principal owners. By reducing the cost and complexity of captive planning, we make this planning feasible for the privately-held, middle-market business.
Very truly yours,
Stewart A. Feldman, CEOCapstone Associated Services, Ltd.
713/850-0550
Featured Employee
Randall S. Bond, Estate & Gift Tax Attorney
We are pleased to announce that, effective August 1, 2009, Randall S. Bond, JD, has joined The Feldman Law Firm LLP as the head of our estate planning department. Bond brings over ten years of estate and gift planning experience to our affiliated law firm.
Formerly, Randy was an attorney and Vice President of Wealth Services at Wachovia Securities (now Wells Fargo Advisors) where he designed estate planning solutions for affluent clients throughout Texas, New Mexico and Louisiana as part of the company's Key Client Solutions division.
Prior to Wachovia Securities, Randy was Vice President of Wealth Management Services for A.G. Edwards & Sons, Inc., where he provided wealth preservation and wealth transfer strategies for 29 A.G. Edwards branches in South Texas and New Mexico.
Randy began his legal career in private practice where he represented clients in will and trust drafting, real estate and probate. Randy also served as counsel for a variety of partnerships, corporations and other closely-held businesses.
Randy received his J.D. from the South Texas College of Law in 1996, and his Bachelor of Arts from Texas A&M University in 1993. He has held both Series 7 and Series 66 licenses, and has been a member of the State Bar of Texas since 1996, where he also serves as a member of the Real Estate, Probate & Trusts law section.
Randy and his wife Laura reside in Missouri City. They have three young children: William (9) and twins Hunter and Brooke (6).
Mr. Bond concentrates his practice on assisting clients with wealth strategies for current and future generations, utilizing his experience in estate planning, multi-generational trust planning, charitable and non-tax planning. He is also highly skilled in creating complex plans for business succession and entity strategy.
