advanced sales december

“Survivor Survivorship” Section 1035 Exchanges

During the 1990s and early 2000s, billions of dollars of survivorship life insurance was sold.  This type of insurance provided a low present value cost and a very competitive internal rate of return (IRR) on death benefit out to joint life expectancy.  The primary need for this insurance was to offset federal estate taxes so […]


Restricted Executive Bonus Plan: A Simple Alternative to Deferred Comp Plans

A Restricted Executive Bonus plan funded with life insurance offers a hybrid arrangement that bridges the gap between a deferred compensation plan and a regular executive bonus plan.  These plans are a great benefit for a company to offer to non-owner key executives to retain and reward them for their valuable services. A)    An employer […]

Life Insurance Provides Creditor, Bankruptcy, and Tax Protection

People purchase life insurance for a variety of reasons.  The income tax protection offered by life insurance on cash value accrual, withdrawals, and death benefits are well-known features.  An often overlooked feature of life insurance is the asset protection that many states provide for life insurance against the claims of judgment creditors.  Every state has a […]

Advanced Sales Final 9.29

Distributions from S Corps Can Fund Life Insurance Premiums

A specific sequence and protocol must be followed under IRC Section 1368 when S Corp cash and/or assets are actually distributed to S Corp shareholders. Each “tier” of distribution must be reduced to zero before moving into the next tier of distribution. Here is the sequence of taxation that must be followed when these distributions […]

business cash flow

Tracking Business Cash Flow to Pay Life Insurance Premiums For C Corp, S Corp, and LLC Owners

Successful C Corp, S Corp, and LLC business owners often want to use the business cash flow to pay life insurance premiums.  These premiums may be for either employer owned polices or for personally owned policies depending on the specific insurance protection needed. Tracking the income tax effect of your business’s cash flow is an […]

When To Recommend a Modified Endowment Contract (MEC)

Since June 20th, 1988, life insurance policies that do not meet the guidelines of the “7 Pay Test” of IRC Section 7702A are classified as Modified Endowment Contracts (MEC).  As such, any lifetime withdrawals or loans from the cash value of a MEC in a gain position will result in LIFO (last in-first out) taxable […]

non mec executive bonus plan

Non-MEC Executive Bonus Plans for Business Owners

Successful business owners and professionals often have maxed out the tax deductible and elective deferral contributions to their qualified retirement plans, such as profit sharing, 401k, or Simplified Employee Pension (SEP) type plans. Often, this prompts questions to their financial professional on whether there are plans that could provide additional supplemental retirement income.  Is there […]

“Linked Benefit” Products Offer Flexibility for Section 1035 Exchange Options

IRC Section 1035 provides exchanges into life insurance or annuity contracts with Long Term Care (LTC) riders to be income tax free and treated as LTC contracts under IRC Section 7702B(e). The tax free exchange provisions in Section 1035 positively impact so-called linked benefit life insurance-LTC products and linked benefit annuity-LTC products. These products fall […]

IRC Section 162 "Linked-Benefit" Executive Bonus Plans for Business Owners and Key Employees

IRC Section 162 Executive Bonus Plans funded with cash accumulation life insurance policies have provided a time-tested non-qualified benefit for many years. The employer simply makes a tax deductible bonus to the shareholder-employee or non-owner key employee who then reports the full bonus as W-2 earned income.   The bonus is used to pay an […]

Inherited IRAs for Spouses, Non-Spouses, Trusts and Estates

It is somewhat common for advisors to be dealing with clients who have accumulated significant mutual fund, IRA or annuity IRA account values.  As a result of rollovers and direct transfers from 401(k) plans, profit sharing plans, defined benefit plans, and 403(b) plans, it is not uncommon for successful business owners, professionals, and wealthy individuals […]