Grantor Trusts

Leverage Your Clients Tax Benefits by Using Grantor Trust Power of Substitution

For many years, irrevocable trusts have been structured for as grantor trusts, for income tax purposes, while still maintaining tax free status for estate tax purposes. A number of favorable IRS Revenue Rulings have solidified the irrevocable grantor trust power of substitution concept under IRC Section 675(4)(C). This concept allows a grantor to substitute assets […]

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Distribution Options for Inherited Non-Qualified Annuities

Often times we find ourselves dealing with clients who have accumulated significant non-qualified annuity account values. Tax deferred Section 1035 exchanges, over many years, may have caused business owners, professionals or wealthy individuals to have large six figure or even seven figure account balances. In these accounts, the original cost basis continues to carry over […]

IRA Legacy Plans Funded by After-tax IRA Distributions AS

Inherited IRA Legacy Plans Funded by After-Tax IRA Distributions

The recovery of the equities markets after the economic downturn of 2008-2009 has led to more successful business owners, professionals and other individuals with more than $1,000,000 in their IRA account. Many of these IRA owners have multiple sources of income as they approach their retirement years. These sources could include: Continued earned income from […]

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Universal Life Policy With Indemnity LTC Rider Owned By An ILIT

The use of an Indemnity LTC Rider is crucial to keep the life insurance death benefit estate tax free. That’s because any rider benefits will be paid only to the ILIT as policy owner, and NOT used to pay extended care costs directly to the extended care provider. Since LTC benefit claims are paid only […]

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“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 […]

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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 […]

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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 […]