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Real estate is a unique industry and a unique asset.
With offices in San Diego, CA and Ft. Myers, FL, we are accustomed to working with clients who are involved in nearly every facet of the real estate business.
From land developers and building contractors to real estate investment groups and consortium’s, Grant Hinkle & Jacobs has the experience to assist with employee retention, business succession, estate planning, and retirement planning, taking into account the uniqueness of the assets involved.
- Developer Case Study #1:
- Contractor Case Study #1:
- Developer Case Study #2:
- Contractor Case Study #2:
Developer Case Study #1:
A national developer of large scale real estate projects was looking to succession planning. Grant, Hinkle & Jacobs worked with advisors of each of the five partners to complete their personal estate planning, including some premium-financed life insurance. We then moved on to the executive and middle management team where an employee retention structure was designed and funded. The result is that when each of the partners eventually retires, they will have guaranteed passive income and, if performance goals are met, the executive team will enjoy the fruits of ownership.
Contractor Case Study #1:
A contractor wanted to sell his company to his key employees within a seven-to-ten year period. The company was profitable and had retained earnings. Grant, Hinkle & Jacobs recommended that each year for four years, the company fund a specially-designed life insurance contract on the key employees. When the owner wants to retire, the company will take tax-free loans from the policy and bonus the money out to the key employees, who will in turn give the money to the owner in exchange for stock. If any of the employees leave prior to vesting of the benefit, the values in the policy remain with the company. In addition to providing a buyout mechanism, there is key man coverage on all key employees from inception to vesting.
Developer Case Study #2:
After helping two sons successfully buy out their father’s spouse by creating and funding a special trust with life insurance, the sons owned a development business, while their late father’s spouse had a secure income stream from investments and rent from real estate assets. The sons, in their late 50s themselves, had a thriving business but weren’t sure as to the exit strategy. They had identified key employees, but the entire company and all divisions had key people not the least of who were the property managers who handled assets in other cities. Grant, Hinkle & Jacobs reviewed the existing benefit package and the cash on hand for surety bonding and determined that all employees could be insured under a guaranteed issue whole life policy for $50,000, $75.000, and $100,000 increments. This not only enhanced the return on cash values to over 3% without disturbing the surety bond, but it also gave the employees a death benefit that grows annually and can be paid to the employee’s beneficiary or the company. Most importantly, since the policies have cash value, if the owners decide to exit via an ESOP, the company will already have a funded mechanism to repurchase shares of retiring employees through the policies’ cash values.
Contractor Case Study #2:
A contractor was required to keep a significant amount of cash on hand for surety bonding. The company’s bank was paying less than half of one percent interest on the deposits. The company was also paying for key-man life insurance for six superintendents to the tune of $84,000 per year. We repositioned $5 million from the bank to an insurance carrier and enhanced the yield to over 3% and gave the company the option of dropping the key-man insurance since the deposits included death benefit as an additional advantage. The net gain to the company was over $200,000 per year, which could be used for expansion and additional hires.