Omakase Underwriting Process GP
Step 1: Begin Application Process
1. Agent downloads and fills out Lionsmark Universal Application (Excel document that can be downloaded by clicking HERE).
2. Agent uploads the Lionsmark Universal Application on the same web portal as above.
3. Agent sets up paramed exam for client (unless agent requests Lionsmark to set this up).
4. Lionsmark will transcribe data onto the carrier application (initially individually-owned, and ownership is later transferred to the LLC once policy is individually issued).
5. Lionsmark will circulate via DocuSign the following documents to be signed by agent and client (we handle the DocuSign process for you):
Gracie Point Loan Application (Lionsmark fills out Sections 1, 6 & 7, client signs Section 7)
*(for carriers that allow e-signatures, and for carriers that do not, PDFs will be emailed for wet signatures)
6. Agent uploads required financials (CLICK HERE to see list of required documents at our secure document upload portal).
7. Lionsmark emails documents to the agent (to be signed by client) required to set up LLC.
8. Lionsmark begins underwriting with Lender and begins process of preparing LLC set up with Lowndes (law firm), however LLC is not set up until policy is ready for issue.
9. Lionsmark submits Lender term sheet to carrier.
Step 2: Carrier Formal Approval
1. First-Year Premium. Client signs policy delivery docs and pays first-year premium to carrier:
Pay with personal check
Sends check directly to carrier
2. Remaining Program Fees. These amounts were all included in the client's annual level contribution as illustrated in the initial proposal.
Check payable to Lender
For a detailed breakdown of the program fees, see the explanation in the FAQ section at the bottom of this webpage.
Step 3: LLC Set Up (3 business day turn-around)
Once Lionsmark receives delivery docs:
1. Lionsmark notifies Lowndes (law firm) to set up the special-purpose LLC:
Insured is the sole member of the LLC
Insured engages an Independent Manager of the lender’s choosing
Insured identifies Internal Manager
LLC Resident Agent is established
All fees associated with above set up have been included in client annual budget
2. Once LLC is formed, policy ownership is transferred from being a “personally-owned” policy to being LLC-owned.
All program fees associated with services rendered by these entities are included in the client's fixed annual outlay.
Step 4: Execute Premium Financing Loan (7 business day turn-around)
Client signs the following:
1. Change Of Ownership Form (changes policy ownership to LLC & LLC becomes beneficiary).
2. Lender premium financing loan agreement (10-year fixed).
3. Collateral assignment form (assigning policy as collateral for premium financing loan).
Step 5: Program Years 2-10
1. Insured pays Lender directly the entire annual contribution.
2. Internal Manager authorizes the following payments from LLC:
Premium payments to carrier
Interest payments to Lender
Program fees to vendors
Step 6: Program Year 11
1. Internal Manager authorizes disbursement from policy values to pay off Lender premium financing loan.
2. Lender releases collateral assignment.
3. Internal Manager authorizes transfer of ownership of policy to insured or insured’s trust, and retires LLC (optional).
4. Independent Manager resigns (optional).
Frequently Asked Questions
Why must the policy be owned by the single-member special-purpose LLC?
Two reasons. One, commercial lending regulations are far less restrictive than personal lending regulations, which is why these favorable loan terms are offered. Two, the lender (Gracie Point) is protected against client personal bankruptcies and creditors attempting to seize client assets from litigation (in this case, the policy value). This arrangement isolates the liability of other business activities and the insured’s personal activities that may result in bankruptcy, ensuring Lender’s collateral liquidity.
Why not just have the policy owned by the LLC from the very beginning?
If we have the LLC set up AFTER the policy is ready for issue, in the event that the client gets declined by the carrier, the client would not have unnecessarily incurred the costs of setting up the LLC to own the policy. Lowndes (the law firm) can turn around the creation of the LLC within approximately 3 business days, hence we wait for the policy to be issued before we set up the LLC. Once the policy is issued and the LLC is set up, the policy ownership is then transferred to the newly formed LLC. In addition, because the first (and second) year premium is paid out-of-pocket in the Omakase platform, though we want to set up the LLC and transfer ownership expeditiously, there is no urgent rush to do so once the policy is issued. For more information about Lowndes, go to https://lowndes-law.com/.
What are the “program fees” and why do they apply?
Keep in mind, all program fees are included in the client's fixed annual outlay as depicted in the proprosal (e.g., $100,000 per year for 10 years). The program fees are included in the client's annual contribution (a flat annual dollar amount) and are in the amount of 0.825% of the entire 10-year loan, charged in years 1 & 2 of the loan term. These fees pay for the attorney fees for setting up the LLC ($1,250), the independent manager’s fee (paid by Gracie Point), the annual state LLC filing fees ($169 per year), the Resident Agent fee ($35 per year), and the loan origination and arrangement fees. Again, all of the program fees just mentioned are included in the client annual contribution as depicted in the original proposal and are not additional costs the client must pay. This 10-year fixed rate guarantee at 4.50% is a proprietary loan arrangement between Gracie Point (the lender), Lowndes (the law firm), and Lionsmark Capital (the premium financing intermediary). No other lending arrangement like this exists in the life insurance premium financing industry.
What is the purpose of the Independent Manager?
In the event that the insured either files bankruptcy or is being litigated against, the “Independent Manager” is the attorney whose role is to explain the structure of the special-purpose single-member LLC and the merits of its asset-protected structure. This is their sole role. Their fee is already bundled into the fixed annual client contributions. Currently, we use Megan McShane-Davis, Esq. as the Independent Manager for our clients’ LLCs. For more information about Megan, go to https://www.mcshanelawfirm.com/attorneys/meghan-mcshane-davis/.
What is the role of the Internal Manager?
This is a trusted person (similar role as a trustee on a trust) that manages the entity (in this case, the LLC). Their duties include authorizing payments from the LLC to the lender/carrier, giving authorization to the carrier to make index allocation changes, policy changes, etc. This person must be a person OTHER than the insured and OTHER than the beneficiary of the insured’s estate (ie: spouse, adult children, etc). This is typically a friend, CPA, financial advisor, or insurance agent that will execute these directives at no cost. In theory, the insured could appoint the “Independent Manager” to do these tasks, but that would incur additional (and unnecessary) attorney fees, whereas the trusted/advisor would probably not charge fees to do these simple administrative tasks.
What is the benefit of this type of LLC-ownership arrangement?
In the special-purpose single-member LLC, there is a layer of asset protection for both the client and the lender (in this case, Gracie Point) because in the event of bankruptcy or litigation, the asset (in this case, the LLC and life insurance policy) is excluded from the personal assets of the insured that creditors or litigators can access. This structure ensures that the lender (in this case, Gracie Point) is protected in regards to the premium financing loan debt, securitized by the policy value, which is owned by the LLC. This part of the reason they can offer such attractive loan rates, including the 10-year fixed rate lock. The client is asset-protected as well, up to the debt still owed to Gracie Point. Any additional policy value above the amount owed to Gracie Point is not asset-protected, however the real value to the client under this arrangement is that if the creditors could seize the policy and its cash value, the client would still be responsible for the debt owed to Gracie Point. This arrangement protects the client from this liability.
LINKS TO ENTITIES THAT ORCHESTRATE SET UP & MANAGEMENT
All program fees associated with services rendered by these entities are included in the client's fixed annual outlay as depicted in the Omakase proposal.
Law Firm That Sets Up LLC:
Lowndes, Drosdick, Doster, Kantor & Reed, P.A.
Meghan McShane-Davis, Esq.
Sunshine Corporate Filings