Another variation, if the seller is in a financial position to make the premiums, is to offer him perhaps 4 mil in policies. That is fine for the buyer, who can get those policies for around 800K or so.
The formula works particularly well with land. Large parcels of land typically take a long time to sell, usually have a down payment and carryback note, and often are asked by the buyer to subordinate to construction financing for a project. The formula will not wpr with cash flow apartments and commercial. Owners are not going to give up cash flow real estate for LSPs.
I knew a life insurance agent some years ago who would approach elderly folks with a big net worth and offer them, for example, a $10M policy. The premium might be $9.5M but the advantage to the insured and his heirs would be the money payout at death would escape estate and federal taxation. The agent made a nice fat commission and the heirs paid no tax. I am not sure if this is still legal.
Any experience with this sort of arrangement?