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 […]
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 […]
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 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 […]
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 […]
Inherited Non-Qualified Annuities for Spouses, Non-Spouses, and Trusts It is somewhat common to be dealing with clients who have accumulated significant non-qualified annuity account values. As a result of tax deferred Section 1035 exchanges over many years, it is not uncommon for business owners, professionals, and wealthy individuals to have large six figure or even […]
Premium financing plans between a financial institution and an Irrevocable Life Insurance Trust (ILIT) can be very complicated and risky arrangements. Wealthy individuals who are familiar with leveraged financial risk may desire to borrow money to pay large premiums for insurance owned by an ILIT to offset federal estate taxes. Often, these individuals can […]
When an individual accumulates and then receives funds distributed from a financial asset to provide retirement income, there are 2 key values: After-Tax Rate of Return (ROR) and the After-Tax Income stream. Various taxes must be taken into account when saving for retirement and receiving retirement income such as federal and state income taxes, and […]
A popular new product that has aroused the interest of many estate planners is a Guaranteed No-Lapse Survivorship Universal Life (SUL) Policy with an indemnity joint long term care (LTC) rider. This type of policy would typically be owned by an irrevocable life insurance trust (ILIT) to provide an income and estate tax-free death benefit at the second […]
President Obama has released his “Greenbook” budget proposal for fiscal year 2017. It renews a number of items from past budget proposals. The Republican Congress will disagree with many of the proposals based on statements from Republican leaders in both the Senate and the House. Certain broad subjects may offer a chance for compromise, especially […]
