Wealth & Risk Management Blog

William Byrnes (Texas A&M) tax & compliance articles

Posts Tagged ‘insurance’

Entering the Retirement Income Game? What About Universal Life?

Posted by William Byrnes on January 15, 2014


A new product feature has emerged to help clients looking to supplement retirement income or protect against the risk of outliving their assets, and, in an unusual twist, this feature is not attached to an annuity.  Insurance carriers have thrown universal life insurance policies into the retirement income game by offering accelerated benefit riders that make it easier than ever for clients to access the value of their policies.

For clients looking to secure life insurance protection, longevity insurance, and a steady stream of retirement income, these new guaranteed income withdrawal riders could be the perfect solution!

Read the full analysis of Professor William Byrnes and Robert Bloink at Think Advisor !

Professor William Byrnes is a full time academic providing unbiased, informative critique to his readers.  Subscribers of Tax Facts and of National Underwriters receive weekly strategic industry intelligence such as retirement strategies and client case studies.  ThinkAdvisor.com, an industry news site, supports the professional growth and vitality of the Investment Advisory community, from RIAs and wealth managers of all kinds, to independent broker-dealer and wirehouse representatives. We provide unparalleled access to the knowledge, information and critical resources they need to succeed at every stage in their career, including professional development, education and certification, industry news and analysis, reference tools and services, and community networking opportunities.

Posted in Insurance, Retirement Planning, Wealth Management | Tagged: , , , , , , , | Leave a Comment »

LTC’s Future Lies in New Crop of Hybrid Products

Posted by William Byrnes on December 30, 2013


When it comes to long-term care coverage, advising risk-adverse clients has historically required a balancing act that many traditional long-term care insurance (LTCI) policies simply are not cut out for. In weighing the need for coverage against the risk of a lost investment, clients frequently decide against obtaining coverage.

Fortunately, changes in the long-term care marketplace have recently inspired a new crop of products that can alleviate some concerns of clients who are already feeling the pinch of a persistently low interest rate economy. While longer lifespans and the ever-increasing cost of care have led to dramatically higher LTCI costs, new asset-based products can allow your clients to obtain affordable coverage on an almost risk-free basis, with features and tax-preferences that will likely tip the scales in favor of coverage for even the most cautious of clients.

Read the analysis of Prof. William Byrnes and Robert Bloink at ThinkAdvisor !

Posted in Retirement Planning | Tagged: , , , , , , , | Leave a Comment »

Court Eases Use of Annuities to Avoid Medicaid Spend-Down

Posted by William Byrnes on December 24, 2013


The winds are finally changing for Medicaid recipients, as evidenced by a recent U.S. Court of Appeals ruling that eases state-imposed restrictions on the use of annuities, reducing the need for your clients to spend down assets in order to become eligible for Medicaid assistance. The 6th Circuit ruling shut down the state’s attack on Medicaid-compliant annuities in this case, ruling in favor of clients who rely upon these annuities to provide sufficient income even if one spouse requires Medicaid assistance to pay for long-term care in a nursing home.

Based on this precedent, your clients may begin to experience a much more favorable Medicaid planning environment as they gain greater flexibility in the purchase timing and beneficiary designation requirements for annuity contracts that escape the Medicaid resource calculation formula, without jeopardizing an unhealthy spouse’s Medicaid eligibility.

Read the full analysis of Professor William Byrnes and Robert Bloink at Think Advisor !

ThinkAdvisor.com supports the professional growth and vitality of the Investment Advisory community, from RIAs and wealth managers of all kinds, to independent broker-dealer and wirehouse representatives. We provide unparalleled access to the knowledge, information and critical resources they need to succeed at every stage in their career, including professional development, education and certification, industry news and analysis, reference tools and services, and community networking opportunities.

Posted in Retirement Planning, Wealth Management | Tagged: , , , , , , , | Leave a Comment »

Health Insurance Providers Fee (or Tax or Penalty, call it what you will) – IRS guidance issued yesterday…

Posted by William Byrnes on November 27, 2013


and it has finally come to pass time … the new health care penalty, tax, fee – whatever it is, to be calculated for businesses.   Perhaps not the best timing considering the rocky roll out.  On the other hand, better to get the bad news 11 months before the next election, when it can be forgotten by the time mail in ballots are sent out.

Notice 2013-76 provides guidance on the health insurance providers fee related to (1) the time and manner for submitting Form 8963, “Report of Health Insurance Provider Information,” (2) the time and manner for notifying covered entities of their preliminary fee calculation, (3) the time and manner for submitting a corrected Form 8963 for the error correction process, and (4) the time for notifying covered entities of their final fee calculation.

For each fee year, the IRS will make a preliminary fee calculation for each covered entity and will notify each covered entity.  The notification will include (1) the covered entity’s allocated fee; (2) the covered entity’s net premiums written for health insurance of United States health risks; (3) the covered entity’s net premiums written for health insurance of United States health risks taken into account after application of § 57.4(a)(4); (4) the aggregate net premiums written for health insurance of United States health risks taken into
account for all covered entities; and (5) instructions for how to submit a corrected Form 8963 to correct any errors through the error correction process.

The information reported on each Form 8963 will be open for public inspection.  This aspect will be very interesting as various groups pull and then post business’ 8963s.

Posted in Compliance | Tagged: , , , , , , , , , , | 1 Comment »

Using Deferred Annuities to Build Pension Plans for the Next Generation

Posted by William Byrnes on November 13, 2013


The most recent shift in the audience for deferred annuity products may come as a surprise to many advisors who are accustomed to selling these vehicles to older clients in pursuit of secure income late in life. Insurance carriers have taken steps to break free of this typical market, in many cases by changing product cost structures to appeal to an expanded (and much younger) client base.

As a result, advisors need to recognize that this new generation of deferred annuity products can be marketed even to clients who are in their 30s, 40s and 50s, erasing the common perception that most annuity purchasers are those stereo typically risk-adverse clients who have already retired. Younger generations have joined the market for secure income, which should have every advisor asking this question: How young is my next annuity prospect?

Read William Byrnes and Robert Bloink’s analysis of indexed variable annuities and how these product offerings may be attractive for certain of your clients at > http://www.thinkadvisor.com/2013/10/21/using-deferred-annuities-to-build-pension-plans-fo <

 

Posted in Wealth Management | Tagged: , , , , , , , , , , | Leave a Comment »

Indexed Variable Annuities—a VA Product Curveball

Posted by William Byrnes on November 11, 2013


Persistently low interest rates may have created a challenging environment for annuity carriers in recent years, but many clients remain deeply skeptical about the prospect of returning to the more volatile equity markets. Indexed variable annuities (IVAs), while developed to help insurance carriers manage risk more accurately, can represent the perfect solution for these market-shy clients.

IVAs—known to some as structured annuities—offer clients an investment alternative that can provide the stability and many of the product offerings associated with annuity products but also the potential for participation in any equity market gains. However, they also offer substantial downside protection to cushion against potential investment losses.

Read William Byrnes and Robert Bloink’s analysis of indexed variable annuities and how these product offerings may be attractive for certain of your clients at > http://www.thinkadvisor.com/2013/10/14/indexed-variable-annuitiesa-va-product-curveball <

 

Posted in Wealth Management | Tagged: , , , , , , | Leave a Comment »

William Byrnes author of 2 tax titles published September 2013

Posted by William Byrnes on October 21, 2013


IMG_1962

Summit Professional Network’s National Underwriter published two books authored by Associate Dean William Byrnes and Robert Bloink: 2014 Tax Facts on Investments and 2014 Tax Facts on Insurance & Employee Benefits

William Byrnes explained National Underwriter Company’s place in the market: “National Underwriter has been the leading publisher for over 110 years to the insurance industry.  Tax Facts was first published over 60 years ago and has become in the words of Michael E. Kitces, Director of Financial Planning of Pinnacle Advisory Group:

“…  THE benchmark standard that all other resources are measured by, for financial planners that might need to look up a question about any kind of tax-related issue involving a client. The Tax Facts series sits on a bookshelf right next to my desk for easy and regular access, and only leaves when I replace it with each year’s update!”  (source: http://pro.nuco.com/Pages/AboutUs.aspx)

William Byrnes added “Tax Facts has built strong a subscriber base of over 20,000 financial planning professionals.  I think financial planning professionals relate to the approach of contextualizing client problems in a Question – Answer format.  Clients don’t come with neatly packaged issues, but instead want to tell their stories and ask questions.  Thus, Tax Facts takes that approach, by example leveraging case studies and typical client questions in the expanding online version.”

William Byrnes continued “Robert Bloink’s experience as a former IRS Counsel and national insurance markets advisor combines well with my big 4 and publication background.”

When asked “What is new about the 2014 edition?” Robert Bloink replied “We have included a new section on cross border employment and estate tax issues, captive insurance and alternative risk transfer, reverse mortgages, DOMA, Affordable Care Act, and REITs as well as expanding coverage of annuities, structured settlements, retirement planning and deferred compensation.”

Alexis Long worked with Thomas Jefferson joint degree juris doctorate and LLM alumnus, Marcus Threats, on the REIT Q&A section which sprung from his senior writing project.  Mr. Threats said that “I obtained a legal education to address challenges that I had experienced in the property investments markets.  While the opportunity for a dual degree at Thomas Jefferson attracted me to the law school, the authorship with a renown professional publisher has really made my Thomas Jefferson education stand out.”

William Byrnes interjected: “This Thursday Adjunct Professor Alexis Long begins the next Publications course via the online LLM and interested students should contact her or myself.  We are already planning the 2014 year and about to complete our JD and LLM publication teams.”

William Byrnes continued: “By the way, in November Robert and I expect to announce the publication of our third Tax Facts title addressing entrepreneur’s income tax and small business tax issues and hope it gains market traction in line with these two titles.”

Posted in book, Estate Tax, Retirement Planning, Taxation, Wealth Management | Tagged: , , , , | Leave a Comment »

Gifting Life Insurance Policies: Not a Simple Matter

Posted by William Byrnes on October 17, 2013


Making a gift of a life insurance policy can prove to be anything but simple for clients who may not know what questions to ask in order to ascertain the potential tax consequences of the transaction. Transferring a policy that is subject to a policy loan can prove even more problematic, even if the transferee is a family member and the transfer is intended entirely as a gift.

Though the rule’s name might suggest otherwise, the transfer for value rule can create a serious tax trap for a client who transfers a life insurance policy, even if nothing tangible actually changes hands in the transaction.   Want to read more?  Open access content at Think Advisor!

Posted in Estate Tax, Insurance, Taxation, Wealth Management | Tagged: , , , , , , , , , , | Leave a Comment »

Whole life — A new asset class to allocate?

Posted by William Byrnes on October 4, 2013


Clients who think they have seen all that whole life insurance has to offer need to take a closer look.  Insurance carriers have taken steps to bring whole life products back to relevance in today’s competitive environment.  In order to compete in a crowded marketplace for insurance products, carriers have developed options to allow clients to transform a traditional whole life policy into a flexible long-term investment product that can provide built-in protection against illness or disability.  Take a look at this entire article on Life Health Pro

If looking for planning tips and client acquisition strategies, feel free to explore National Underwriter Advanced Markets Journal and Main Library 

 

Posted in Insurance, Wealth Management | Tagged: , , , , , , , | Leave a Comment »

Overlooked Obamacare Silver Lining: Savings for Small Businesses

Posted by William Byrnes on October 2, 2013


Your small business clients know that the health insurance exchanges set up under the Affordable Care Act (ACA) are coming—and soon—but they may not realize that they create significant benefits for employers in the form of dramatic cost savings above and beyond the current rules governing deductibility of premiums and eligibility for certain tax credits.

Beginning Nov. 1, small business clients will be eligible to sign up online for a specially created Small Business Health Options Program (the SHOP exchange), but clients are unlikely to have realized that the rules of the game have changed with the advent of SHOP.

Read William Byrnes and Robert Bloink’s analysis at Think Advisor

Posted in Compliance, Insurance | Tagged: , , , , , , , | Leave a Comment »

The benefits to clients from the deferred income annuity sales boom

Posted by William Byrnes on September 24, 2013


When it comes to lifetime income planning, clients are always looking for the latest and greatest strategy to ensure that their income needs will be met during retirement.

Deferred income annuities are finally experiencing a dramatic growth spurt in the market, which has motivated insurance carriers to design products with features that allow each product to be tailored to meet the individual client’s needs. As the number of carriers offering deferred income annuities expands, a corresponding boost in client demand is expected — especially when clients discover that they can find the income features they have come to expect from an annuity product, but with a level of flexibility in required contributions and income options unique to the deferred income annuity market.

Read William Byrnes and Robert Bloink’s full analysis of this boom in the sales of deferred income annuities at LifeHealthPro: http://www.lifehealthpro.com/2013/09/11/the-benefits-to-clients-from-the-deferred-income-a

 

Posted in Pensions, Retirement Planning, Uncategorized, Wealth Management | Tagged: , , , , , , , | Leave a Comment »

Term Life: An better option for clients?

Posted by William Byrnes on September 12, 2013


Advisors who think they know all there is to know about term life insurance might be surprised to learn that these policies are finally being brought up to speed.

Increasing demand for already popular term life policies has insurance companies jumping to differentiate their products in a crowded market. The result is a new generation of term life products that can be customized to meet the needs of an extremely diverse section of the market.

Whether your clients are concerned about covering education costs or providing enhanced benefits in the case of specific accidents, modern term life insurance might be the solution.  … Read this full analysis by William Byrnes at  > LifeHealthPro <

Posted in Insurance, Retirement Planning | Tagged: , , , , , , , | Leave a Comment »

How to Build Your Own Solution to Long-Term Care Insurance Scarcity

Posted by William Byrnes on September 10, 2013


A basic problem for clients looking for long-term care insurance today is that they simply may not be able to find it. Major carriers have pulled out of the market in the last year, and the policies that remain can be prohibitively expensive and contain strict qualification requirements.

Fortunately, the product market is evolving so that a relatively new method of securing tax-preferred long-term care benefits has emerged. Hybrid annuity products that combine the estate and income planning features of an annuity with the protection of long-term care insurance are becoming increasingly popular among clients looking for replacement insurance.

Read William Byrnes’ analysis of building your own solution to long-term care insurance at > The Law Professor Column of Think Advisor <

 

Posted in Insurance, Retirement Planning | Tagged: , , , , , , , , | Leave a Comment »

Can Clients 1035 an Inherited Annuity?

Posted by William Byrnes on September 6, 2013


2014_tf_on_investments-mAnnuity products are one area in which trends in contract features are constantly changing as insurance companies endeavor to more effectively meet the needs of annuity investors and with the attendant problem that beneficiaries of inherited annuities could end up with antiquated investment products.

This constant evolution of investment trends may have your clients wondering what type of value their annuities will offer beneficiaries after their death. The IRS has just blessed a solution to this planning dilemma by allowing a beneficiary to exchange inherited annuities for another annuity product that more accurately reflects the beneficiary’s investment goals.

Read the complete analysis by William Byrnes and Robert Bloink at > Think Advisor <

Posted in Insurance, Taxation, Wealth Management | Tagged: , , , , , , , | Leave a Comment »

the Emergence of the Company Limited by Guarantee in Company Law

Posted by William Byrnes on August 29, 2013


The full article may be downloaded at > William Byrnes’ academic SSRN page <

The origin of the company limited by guarantee is nearly impossible to pinpoint.  While some experts believe that this type of business form sprang into being overnight, it is more likely that the company limited by guarantee slowly developed over centuries of time.  The origins of the company limited by guarantee have a fuzzy existence, which is likely attributable to the notion that this business form is comprised of bits and pieces of other business forms that existed in early English history.

The most plausible origin of the company limited by guarantee stems from fire insurance, which came into existence after the Great London Fire of 1666.  An excerpt from an eyewitness’s diary describes the tragic fire: “I saw a fire as one entire arch of fire above a mile long: it made me weep to see it.  The churches, houses are all on fire and flaming at once, and a horrid noise the flames made and the cracking of the houses.”[1]  For this type of tragedy to occur at a time when England businesses and communities were beginning to flourish was a great devastation of utmost significance.  The Great London Fire may have been the catalyst that drove individuals to find better ways of insuring themselves in the future, should another similar tragedy occur in the future.  Individuals had to protect their future economic interests, and the emergence of a company that allowed individuals the ability to conduct business as needed while still providing them with the limited liability necessary to protect against future damages may have been the foundation of the company limited by guarantee.

In order to understand the modern day characteristics of the company limited by guarantee, the characteristics of its members, the relations of its members to the company and the relations to each other, it is necessary to first understand the historical origin of the United Kingdom (“UK”) business organization of the company.  This article will begin by studying the history of the company limited by guarantee by analyzing the following types of businesses: (1) partnerships; (2) trusts; (3) charitable trusts; (4) assurance companies; (5) joint stock companies; and (6) investment companies.

The second part of this article focuses on explaining and examining the company limited by guarantee, including the evolution of the English Company from the Chancery partnership and trust, to the joint stock company’s statutory recognition and devolvement from the partnership.  This section will also analyze the evolution and statutory recognition of the company limited by guarantee, and generally distinguish its characteristics from the company limited by shares.

The third part of this article includes an in-depth statutory comparison of the modern day (1) company limited by shares; and (2) company limited by guarantee.

Although it is likely that the main foundation of the company limited by guarantee stems from fire insurance, the origin of other historic business types must first be discussed in order to envision the larger picture – including all of the major business forms that existed in early English history – in order to pinpoint the exact origins of the modern day company limited by guarantee.


[1] Samuel Pepys, Diary 390 (George Bell & Sons 1893).

The full article may be downloaded at > William Byrnes’ academic SSRN page <

Posted in Insurance, Tax Exempt Orgs, Wealth Management | Tagged: , , , , , | 2 Comments »

2 New Tax Facts Books Released

Posted by William Byrnes on August 23, 2013


National Underwriters published 2014 editions of Tax Facts books authored by William Byrnes and Robert Bloink of the graduate tax program.

2014 Tax Facts on Investments

2014 Tax Facts on Insurance & Employee Benefits

“We have included a new section on cross border employment and estate tax issues, captive insurance and alternative risk transfer, reverse mortgages, DOMA, as well as the previously expanding sections on ETFs and on precious metals & collectibles,” William Byrnes said.  “Moreover, we hope to soon announce the newest title of Tax Facts addressing entrepreneurs and their small business tax issues.” 

“Tax Facts Books and the Tax Facts Online portal have built strong following of many thousand of financial planning professionals.  I think financial planning professionals relate to National Underwriter’s approach of contextualizing client problems in a Question – Answer format.”

Both publications are now available as e-books, as an alternative or in combination with print.

Posted in book, Retirement Planning, Taxation, Wealth Management | Tagged: , , , , , , , , , | Leave a Comment »

Reforming Annuities’ Image Problem: New Focus on Risk

Posted by William Byrnes on August 16, 2013


Today’s media coverage of the variable annuity market has focused on company buybacks and modifications to existing clients’ product guarantees—a prospect that has many clients feeling more wary than ever about annuity purchases.

Despite this, insurance companies have used the negative experiences of recent months as motivation to effect positive change in their annuity product offerings by offering clients real flexibility and risk management options.

read William Byrnes and Robert Bloink’s full analysis regarding annuities at > ThinkAdvisor <

Posted in Retirement Planning | Tagged: , , , , , , , | Leave a Comment »

Planning Concept: Traditional Private Annuity in Trust Variation

Posted by William Byrnes on August 14, 2013


Provides an overview of private annuities in relation to financial planning.  Examines a new concept wealth managers are employing for their clients with regards to private annuities and trusts. 

The traditional private annuity is a transaction used by some wealth managers for clients whose circumstances permit. Generally a private annuity transaction occurs where the grantor transfers assets to a third party who pays the grantor an annuity, usually for the life of the grantor.[1]

When a trust is involved with a traditional private annuity, the common transaction may look like this:  “The owner of highly appreciated commercial real estate transfers the property to an irrevocable trust in exchange for the trust’s promise to pay an annuity for life. The present value of the annuity equals the fair market value (‘FMV‘) of the property. The trust then sells the property to a third party for a sale price equal to its FMV.” [2]  For additional discussion on private annuity contracts see National Underwriter Advanced Markets’ Private Annuity [3]

The idea behind wealth managers suggesting similar transactions “is that the original transferor can spread his large capital gain over life expectancy by using the irrevocable trust as an intermediary rather than selling directly to the third party (who is presumably unwilling to do a private annuity).” [4]

There are considerations wealth managers must take into account when discussing private annuities with their clients. These may include valuation methods, arms-length transaction consideration, and incidents of ownership. For a detailed discussion of the tax implications of private annuities, please see Tax Facts Q 41. How are payments received under a private annuity Taxed? [5]

It is often the case that a trustee, although not necessarily, will use “the sale proceeds to insure its annuity obligation by purchasing a commercial immediate annuity.” [6]

Planning Concept:  Some wealth managers have recently begun to structure private annuities for their clients slightly differently than the traditional method discussed above.  Here the idea is a private annuity contract issued from the trust to the grantor who pays valuable consideration for the annuity which carries with it a condition precedent or “contingency”.  The condition on the annuity could be the death of the grantor’s spouse.  The trustee may “reinsure” the risk with the purchase of life insurance from payment of the annuity in the event the condition takes place.[7]  Similar considerations with regards to private annuities should also be considered with private annuities that carry a condition.

In the event the grantor’s spouse does not die in the near future, the premiums paid for the private annuity could generally be considered income to the trust, which may be owned by a second generation.  If the spouse does die in the near future, payment of the annuity would create general gain taxation with a tax-free redemption up to basis. [8]


[1] Manning on Estate Planning. PLIREF-ESTPLN s 5:9, 5-30.  “§ 5:9 The Private Annuity”.

[2] New York Estate Planning. 33 ESTPLN 13.  “Maximizing The Planning Opportunities Of Private Annuities”. 2006.

[3] AUS Main Libraries, Section 2. The Federal Estate Tax, D—Annuities In The Gross Estate.

[4] Id.

[5] Tax Facts Q 41. How are payments received under a private annuity taxed

[6] Id.

[7] 33 ESTPLN 13

[8] PLIREF-ESTPLN s 5:9, 5-30; 26 U.S.C.A. § 1001.

Posted in Insurance, Taxation, Wealth Management | Tagged: , , , , , , , | Leave a Comment »

Incidents of Ownership and Burden on the Estate

Posted by William Byrnes on August 12, 2013


Why is this Topic Important to Wealth Managers?   Discusses estate tax considerations in regards to life insurance policies.  Also, includes a detailed dialogue of the incidents of ownership concept. 

What do most wealth managers try to avoid when planning with life insurance and trusts?

That the Gross Estate for Estate Tax calculations would include the death benefit from the policy in the estate.[1]

What are some common ways to avoid this dilemma when using a trust and life insurance in regards to estate planning?[2]

The insured should never own the policy; “it should be owned from inception” by the trust or third party.

  • A trustee takes “all the actions to purchase the policy on the life of the insured”.
  • The trustee should be “authorized but not required to purchase insurance on the life of anyone whose life the trust’s beneficiaries have an insurable interest.”
  • The trust explicitly prohibits the insured from obtaining any interest whatsoever that the trust may purchase on the insured’s life.
  • The trust does not require, but rather permits the premium payments.
  • Trust is well funded, beyond that of one year of premium payments.
  • The trustee acts in the best interest of the beneficiaries.

A revisionary interest will give rise to incidence of ownership [3], which could include the insured’s right to; [4]

  • Cancel, assign or surrender the policy.
  • Obtain a loan on the cash value of the policy or pledge the policy as collateral for a loan.
  • Change the beneficiary, change contingent beneficiaries, change beneficiaries share of the proceeds.

When discussing incidents of ownership, naturally the 3 year rule should be further expounded.[5] “The 3-year ‘bring-back’ rule” is applicable, “with respect to dispositions of retained interests in property which otherwise would have been includable in the gross estate”.[6]  As discussed in AUS Main Libraries Section 8, C—Lifetime Gifts Of Insurance And Annuities-“Gifts Within Three Years Of Death, essentially, the rule as it applies to life insurance means that any policy transferred out of the estate of the insured within 3 years of his/her death, the policy proceeds are brought back into the gross estate for estate tax calculations.

It is generally accepted that “the trust should be established first, with a transfer of cash from the grantor to be used to pay the initial premium” or a few years of premiums.  “The trustee would then submit the formal application, with the trust as the original applicant and owner.”  Generally, the insured will “participate only to the extent of executing required health questionnaires and submitting to any required physical examination.”  Again the key is that the, “grantor/insured not have possessed at any time anything that might be deemed an incident of ownership with respect to the policy.” [7]

Posted in Estate Tax, Taxation | Tagged: , , , , , , , | Leave a Comment »

Income-based premiums triple Medicare costs under PPACA

Posted by William Byrnes on July 31, 2013


For your high net worth and upper middle class clients, Medicare planning has become a critical component of a well-executed retirement income plan.

New rules put into effect under the Patient Protection and Affordable Care Act (PPACA) can impact these clients’ retirement income planning in ways they might not yet realize by increasing their Medicare premiums proportionally as income increases.  The new rules will expand the pool of clients to which these monthly increases will apply.

In today’s environment, it is more important than ever to consider Medicare premiums when planning for retirement expenses.

Medicare Income-Based Premiums … read my analysis at LifeHealthPro – http://www.lifehealthpro.com/2013/05/13/income-based-premiums-triple-medicare-costs-under

Posted in Retirement Planning, Wealth Management | Tagged: , , , , , , , | Leave a Comment »

The Value of Variable Life Insurance: Surrender Charges and Fair Market Value

Posted by William Byrnes on July 25, 2013


The U.S. Court of Appeals for the Ninth Circuit recently affirmed the Tax Court’s position on the use of surrender charges in the valuation equation when a nonqualified employee benefit plan that holds a life insurance policy distributes that policy to a taxpayer upon winding up of the plan.

When these life insurance policies are distributed to the taxpayer-employees under such a plan, the taxpayers are responsible for paying taxes on the value of the policies. According to the IRS, the policy value equals the cash value of the policy without regard to any surrender charges. So what do your clients have to include in income if the actual cash surrender value of their life insurance policy is negative?

The Facts

Read the full analysis at ThinkAdvisor – http://www.thinkadvisor.com/2013/05/28/the-value-of-variable-life-insurance-surrender-cha

Posted in Estate Tax, Taxation, Uncategorized, Wealth Management | Tagged: , , , , , , , | Leave a Comment »

In Medicaid Planning, Don’t Surrender Life Insurance—Trade It for LTC Instead

Posted by William Byrnes on July 23, 2013


Your clients who are nearing retirement age might often wonder why they bother maintaining the life insurance policies they have funded for years. With children grown, the need to provide for beneficiaries in the event of an untimely death has already been eliminated. Further, these policies are considered assets that can have a significant impact when determining Medicaid eligibility.

Despite this, recent proposals in several states can give older clients a reason to maintain their policies and provide peace of mind in Medicaid planning. Under these proposals, ownership of a life insurance policy can actually help clients in long-term care planning as more state Medicaid offices embrace the use of life settlements in conjunction with Medicaid coverage.

The Proposals

read the full analysis at ThinkAdvisor – http://www.thinkadvisor.com/2013/06/03/in-medicaid-planning-dont-surrender-life-insurance

Posted in Retirement Planning, Wealth Management | Tagged: , , , , , , , | Leave a Comment »

The life insurance fiscal cliff: The end of a tax-preferred product class?

Posted by William Byrnes on December 7, 2012


Clients today assume that the tax-free status of life insurance is a given and may have even engaged in fiscal cliff planning that involves the purchase of life insurance to provide a source of tax-free investment income. Given today’s political climate, it is important for clients to realize that no tax preference is safe and that the tax benefits they have come to expect from life insurance are no exception.

read this article at Life Health Pro e-zine

6432a21e_TJSL-LEEP

Posted in Estate Tax, Insurance, Retirement Planning, Tax Policy | Tagged: , , , , , | Leave a Comment »

How New Deferred Annuities Provide Income Early in Retirement

Posted by William Byrnes on November 19, 2012


…insurance companies have begun building annuity products in a variety of shapes and sizes, and the latest crop of deferred income annuity products could pave the way for clients seeking to maximize retirement income security in the years leading up to retirement.  Read the full article on AdvisorOne – http://www.advisorone.com/2012/11/08/how-new-deferred-annuities-provide-income-early-in

Posted in Estate Tax, Pensions, Retirement Planning, Taxation, Wealth Management | Tagged: , , , , , , | Leave a Comment »

States Competing for Captives Insurance Business

Posted by William Byrnes on March 19, 2012


Looking to recapture its competitiveness in the domestic captive insurance business, Nevada passed Assembly Bill 74 (AB 74), which amends the state’s captive insurance law. Nevada Governor Brian Sandoval recently praised the amendment, saying it that “will make Nevada a more attractive place to do business for captive insurers.”

Generally, a captive insurance company forms as a subsidiary of a company to cover the risks of the parent company and its other subsidiaries. A captive insurance company typically does not insure risks of unrelated third parties—although some will insure their customers’ risks. Other captive insurers assume the risks of members of a trade association or group.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the application of the Health Care law to captive provided health insurance, see Tax Facts, see 252. What nondiscrimination requirements apply to employer provided health benefits?.

Questions about Captives? Contact our Panel of Experts. Benjamin Terner is our “Captive Expert” and can answer your questions relating to domestic and offshore arrangements

Posted in Wealth Management | Tagged: , , , , , , , | Leave a Comment »

IRS Global Settlement for Millennium 419

Posted by William Byrnes on March 6, 2012


A massive increase of lawsuits and IRS investigations have surrounded the Millennium Multiple Employer Welfare Benefit Plan for years, with plan participants claiming it was nothing but a fraudulent device with sole purpose of generating millions in commissions for its agent promoters. There are accusations of taking a total of $500 million from 500 clients by inducing them to participate in a plan that offered no tax or other benefits to its participants.

Several lawsuits are still pending against the Millennium Plan, but at least one aspect of the alleged scam plan has been resolved. The IRS announced on July 5 that it reached an agreement with the Millennium Multiple Employer Welfare Benefit Plan (“Millennium Plan”). After numerous fraud allegations and the IRS abusive tax shelter investigation, the Millennium Plan filed for Chapter 11 bankruptcy.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of welfare benefits plans in Advisor’s Journal, see Tax Courts Holds Employee Taxable for Value of Life Insurance Owned by Welfare-Benefit & Deductions for Life Insurance Premium Payments to Welfare Benefit Plan Denied (CC 10-29).

Posted in Wealth Management | Tagged: , , , , , , , | Leave a Comment »

Foreign Account Compliance: Are Foreign Policies Included?

Posted by William Byrnes on December 20, 2011


The Foreign Account Tax Compliance Act (FATCA) was designed as a comprehensive measure to combat offshore tax evasion—a noble aim. However, FATCA’s comprehensiveness is also a burden for many in the financial services industry, especially insurance carriers and producers. In comments to regulators, one foreign life insurance trade organization, the Association of International Life Offices (AILO), recently called FATCA’s requirements “onerous and disproportionate to the risk involved.”

Passed as part of H.R. 2847, the Hiring Incentives to Restore Employment Act (HIRE Act) on March 18, 2010, FATCA combats tax evasion by requiring disclosure from foreign institutions about accounts held by people, including U.S. citizens, and institutions risk being subject to U.S. tax. Many life insurance and annuity contracts are classified “accounts” under the Act, although FATCA doesn’t generally apply to property, casualty, and term life insurance contracts.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of FATCA in Advisor’s Journal, see IRS Proposed FATCA Guidance Expands Offshore Compliance Initiatives (CC 10-52) & Offshore’s Limited Shelf Life (CC 10-47).

Posted in Wealth Management | Tagged: , , , , , , , | Leave a Comment »

When are policy loans taxable?

Posted by William Byrnes on November 23, 2011


Generally, life insurance policies be withdrawn without income tax consequences. However, there are circumstances where a “loan” is immediately taxable. We have covered situations where a policy is surrendered with a loan outstanding, resulting in taxable income. This article discusses another case where a policy “loan” will be treated as taxable income.

In Frederick D. Todd II et ux. v. Commissioner (T.C. Memo. 2011-123), the Tax Court considered whether a distribution from a welfare benefit fund to a fund participant was a policy loan or a taxable distribution.

For previous coverage of life insurance policies held by welfare benefit funds in Advisor’s Journal, see Deductions for Life Insurance Premium Payments to Welfare Benefit Plan Denied (CC 10-29).

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For in-depth analysis of welfare benefit funds, see Advisor’s Main Library: B—Welfare Benefit Funds.

 

Posted in Wealth Management | Tagged: , , , , , , , | Leave a Comment »

Annuities: They Get No Respect

Posted by William Byrnes on November 17, 2011


We are all aware that annuities have a bad reputation in the media: High fees, high-pressure sales, and unsuitability are the predominating themes.

A recent Securities Litigation & Consulting Group white paper summarizes  the sentiments of the anti-annuity press, commenting that, “[a]nnuities stand out as the investment are most likely to be unsuitable since in virtually every instance, the investor would have been better served by mutual fund or a portfolio of individual stocks.”

Annuities are neither inherently “good” nor “bad.” It follows that rational evaluation of annuities can’t be conducted in a bubble—it must focus on their application.  Herein lays their value and the coup de grâce the industry and individual producers have been awaiting.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of annuities in Advisor’s Journal, see How Much to Allocate to Annuities: A Critical Analysis (CC 11-109).

For in-depth analysis of the income taxation of annuities, see Advisor’s Main Library: Section 19.2 Income Taxation of Annuities.

Posted in Wealth Management | Tagged: , , , , , , , | Leave a Comment »

Are Indexed Annuities Securities?

Posted by William Byrnes on November 8, 2011


Last year Congress finally concluded about whether indexed annuities are securities. As a security, indexed annuities were  subject to regulation by the SEC by including a provision in the in the Dodd-Frank Wall Street Reform Act that defines indexed annuities as insurance products outside the agency’s jurisdiction.

This year, some states are refusing to take Congress’s “NO” for an answer. In the latest action on the issue, Illinois Secretary of State Jesse White issued an order on May 24 indirectly concluding that indexed annuities are securities under Illinois law.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of indexed annuities in Advisor’s Journal, see Indexed Annuities: Still Insurance (CC 10 42).

Posted in Wealth Management | Tagged: , , , , , , , | Leave a Comment »

What Next? ILITs & Estates under 5MM

Posted by William Byrnes on October 26, 2011


Life insurance is a common tool for ensuring estates have adequate liquidity to pay estate expenses and taxes. But recent changes to the estate tax have some people questioning whether the high premiums they’re paying are worth it when their estates are no longer likely to be hit by the estate tax.

With a $5 million exclusion amount and brand-new exclusion portability provisions, far fewer households have to deal with the federal estate tax. But is allowing unneeded life insurance to lapse the best solution?

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of life insurance valuation in Advisor’s Journal, see Relative Policy Value of Life Insurance (CC 11-57).

Posted in Wealth Management | Tagged: , , , , , , , | Leave a Comment »

Are Unisex Mortality Tables Coming to America?

Posted by William Byrnes on October 6, 2011


“Men Are From Mars, Women Are From Venus,” goes the saying from the popular self-help book. But in a recent ruling, the European Court of Justice said that, although statistically verifiable, you’d better not acknowledge the 100 million mile (sorry, kilometer) gap between men and women when you’re pricing life insurance premiums.

The highest court in the EU ruled earlier this year that the long-standing practice of basing insurance premiums on gender is sex discrimination that is prohibited under EU law. Despite hundreds of years of data verifying the simple fact that women live longer than men, insurance carriers in the EU will soon be prohibited from considering gender when setting insurance premiums.

Under EU law, “[e]quality between women and men must be ensured in all areas, including employment, work and pay.” The European policy generally has been applied to remove gender discrimination in the workplace. But a 2004 European Directive “prohibits all discrimination based on sex in the access to and supply of goods and services.” And that directive has been specifically applied to access to life insurance.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the Life Insurance Gender Gap in Advisor’s Journal, see Is the Life Insurance Gender Gap Really Closing? (CC 11-68).

Posted in Wealth Management | Tagged: , , , , , , , | 1 Comment »

How Much to Allocate to Annuities: A Critical Analysis

Posted by William Byrnes on October 4, 2011


A commonly known characteristic of annuities is providing retirees retirement income security. However, a more complicated aspect is deciding exactly how much of a retiree’s nest egg should be allocated to an annuity to reduce the person’s probability of outliving their retirement income.

The Employee Benefits Research Institute takes some of the guesswork out of allocation in a study released this month. The study analyzes the impact of longevity and immediate annuities on retirement income adequacy. The study finds that the “optimal level of annuitization and asset allocation that would give a desired level of confidence that people will have enough retirement income, based on the three different types of risk: investment income, longevity, and long-term care.”

The study’s results offer a prescient guide for advisors looking to maximize their client’s retirement success through annuities. Although parts of the study are quite technical, briefly reviewing the results can be enlightening.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of annuities in Advisor’s Journal, see Drama Over the “Drawbacks” of Annuities (CC 11-62).

Posted in Wealth Management | Tagged: , , , , , , , | Leave a Comment »

Court Holds that STOLI Law Isn’t Retroactive

Posted by William Byrnes on October 3, 2011


A stranger-owned life insurance promoter won a big victory when the California Court of Appeals ruled 2-1 that California’s 2009 anti-STOLI law does not apply to policies issued before the statue was enacted.

The ruling was issued by the 4th Appellate District in an appeal on the case: The Lincoln Life and Annuity Company of New York vs. Jonathan S. Berck, as Trustee, etc, Case No. D056373 (17 May 2011).

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of STOLI cases in Advisor’s Journal, see STOLI Scheme Lands Insurance Agent in Jail (CC 11-92).

Posted in Wealth Management | Tagged: , , , , , , , | Leave a Comment »

Is the Contestability Period a Shield or a Sword in STOLI Disputes?

Posted by William Byrnes on September 12, 2011


Should insurance applicants and third-party investors be allowed to make material representations when applying for life insurance, if they can manage to hide misdeeds for at least two years? The United States District Court for the Southern District of New York thinks so.

In the latest STOLI case coming out of the federal courts, judge and jury discussed whether blatant fraud on a life insurance policy application is actionable to invalidate a policy after the contestability period has passed. The jury and court held for the investor in the $5 million case.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of STOLI in Advisor’s Journal, see STOLI Scheme Lands Insurance Agent in Jail (CC 11-92), New York Court of Appeals Upholds STOLI Arrangement (CC 10-106), & Recent STOLI Case Is a Big Win for Insurers (CC 10-59).

Posted in Wealth Management | Tagged: , , , , , , , | Leave a Comment »

Administration Defends Proposed Insurance Limitations

Posted by William Byrnes on September 6, 2011


The Obama Administration’s 2012 federal budget proposal has revived two budget proposals that will impact the life insurance business – one affecting Corporate-Owned Life Insurance (“COLI”) and the other affecting carriers’ Dividends-Received Deduction (“DRD”).

In response to concern that the proposals tamper threaten the tax preferred status of life insurance, the Treasury recently issued a letter clarifying that these proposals have relevance only to tax arbitrage issues, not the tax treatment of death benefits.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of corporate life insurance in Advisor’s Journal, see Obama Budget Would Undercut Utility of Life Insurance in Small Business Planning (CC 11-41).

For in-depth analysis of taxation affecting corporations, see Advisor’s Main Library: A – The Corporate Income Tax.

Posted in Wealth Management | Tagged: , , , , , , , | Leave a Comment »

The Changing World of Health Insurance: MLR’s Slam Commissions

Posted by William Byrnes on August 31, 2011


Increased medical loss ratios (MLRs) are devastating health insurance producers’ balance sheets and driving agents out of the health insurance business. As of  January, the Obama Administration’s Affordable Care Act increased the MLR requirement imposed on health insurance companies, forcing many carriers to reduce agent commissions by 25 percent or more.

The objective behind imposing MLRs is to ensure that consumers receive the full value of their premium dollars. This is accomplished by implementing a shift in how insurance carriers spend their money. Insurance carries are now required to spend premium dollars on direct medical services, rather than on administrative costs and profits. Under the new MLR program, insurers must spend 80 to 85 cents of every dollar on direct medical services. Insurers who fail to meet the MLR requirement must either adjust their premiums to account for any discrepancies, or refund excess premiums to consumers.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of health care reform in Advisor’s Journal, see Long-term Care Insurance Reform Act of 2010 (CC 10-46), Changes Affecting Large Employers in the 2010 Health Reform Law (CC 10-17), Changes Affecting Business in the 2010 Health Reform Law (CC 10-16), & Changes Affecting Individuals in the 2010 Health Reform Law (CC 10-15).

Posted in Wealth Management | Tagged: , , , , , , , | Leave a Comment »

STOLI Scheme Lands Insurance Agent in Jail

Posted by William Byrnes on August 29, 2011


A California insurance agent will spend years behind bars for his part in a stranger originated life insurance (“STOLI”) scheme that swindled six victims out of almost $800,000. In addition to being sentenced to 3 years 8 months in jail, Victor L. Weber, 55, was also ordered to pay restitution to his victims.

In the typical STOLI arrangement, investors or promoters approach seniors to allow investors to purchase life insurance on the seniors’ lives. Insureds are typically enticed to sign on the dotted line by promises of “free life insurance,” cash payments, vacations or other perks. Insureds are usually unable to purchase needed life insurance because their life insurance capacity is occupied  by the investor owned policy.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber)

For previous coverage of stranger-originated life insurance in Advisor’s Journal, see New York Court of Appeals Upholds STOLI Arrangement (CC 10-106) & Recent STOLI Case Is a Big Win for Insurers (CC 10-59).

Posted in Wealth Management | Tagged: , , , , , , , | Leave a Comment »

modern trends surrounding captive insurance – webinar

Posted by William Byrnes on August 26, 2011


Captive Insurance webcast

 

CLICK HERE TO REGISTER – No COST!

Please join us next month as we discuss the modern trends surrounding captive insurance. Wealth managers who have an interest in captives will likely find the information and presentation useful. CLICK HERE TO REGISTER

For additional information on captives see, Advisorfyi.com–States Competing for Captives Insurance Business,Alternative Risk Transfer RevisitedCaptive Market Continues to GrowLLC Series and Cell CompaniesGroup Captive Insurance Companies and Year End Tax Considerations, and A Dollar Saved…Captive Insurance Company Costs

CLICK HERE TO REGISTER

Posted in Courses | Tagged: , , , , , , , | Leave a Comment »

New Cancellation of Debt Rules Leave Grantors on the Hook

Posted by William Byrnes on August 19, 2011


The collapse of the secondary market for life insurance during the recent financial crisis left a lot of trusts anxious to dispose of large face value life insurance policies. Trusts that handed back policies in satisfaction of premium finance loans were then struck, along with their grantors, with massive tax bills for what is known as cancellation of indebtedness or cancellation of debt (COD) income.

The IRS recently released proposed regulations that address the income tax treatment of cancellation of debt income of trusts. Although this highly technical area of the law may not be of interest to lay audiences, it is a vital aspect for advisors selling high-value life insurance policies.

 

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber)

For previous coverage of an interesting case involving a premium financed policy in Advisor’s Journal, see Lawsuit Seeks to Hold Insurer Responsible for Suspicious Death (CC 10-101).

For in-depth analysis of life settlements (which can be structured as a premium finance transaction), see Advisor’s Main Library: B—The Life Settlement Industry.

Posted in Wealth Management | Tagged: , , , , , , , | Leave a Comment »

Turning Plan Sponsors’ Risk into Reward

Posted by William Byrnes on August 12, 2011


Barry Flagg continues his popular series, this month discussing the cash value of life insurance as a factor of suitability. The desirability of a permanent life insurance product is influenced by the degree of cash value liquidity throughout the life of the policy. All other factors being equal, the higher the liquid cash value after deduction of cost of insurance charges and policy expenses (including contingent surrender charges), the more suitable the policy.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For in-depth analysis of income taxation of life insurance, see Advisor’s Main Library: D–Gain Or Loss On Surrender Or Sale

Posted in Wealth Management | Tagged: , , , , , , , | Leave a Comment »

Is the Life Insurance Gender Gap Really Closing?

Posted by William Byrnes on August 3, 2011


Historically, the amount of life insurance purchased by men dwarfed that of women. Although the gender gap is closing, there’s still a discrepancy between the amount of life insurance coverage owned by men and women. A recently released study by the Life Insurance and Market Research Association (LIMRA) revealed that, although men and women own life insurance in nearly equal numbers, and women are working now more than ever, the amount of coverage owned by women is still fewer than men.

Historically, men have been the main source of household incomes; but recent research has revealed that about 30 percent of women earn more money than their husbands. Despite this change, LIMRA’s studies found that women’s life insurance ownership has not increased proportionately. Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For in-depth analysis of life insurance in qualified plans, see Advisor’s Main Library: A – Life Insurance in Qualified Plans & 412(i) Plans.

Posted in Wealth Management | Tagged: , , , , , , , | Leave a Comment »

Drama Over the “Drawbacks” of Annuities

Posted by William Byrnes on July 27, 2011


A recent Businessweek article highlighting what it calls the “drawbacks” of annuities is the latest in a long line of articles panning the financial products. But do annuities—especially variable annuities—endure justified scrutiny, or are annuities just an easy target of the mainstream media? And, where annuities are the right choice for your clients, how can you counter the negative press to help them make the right investing decision? Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

Posted in Wealth Management | Tagged: , , , , , , , | Leave a Comment »

New York Holds Carrier Can’t Deny Term Conversion for Settlement

Posted by William Byrnes on July 26, 2011


The New York Department of Insurance, Office of General Counsel, stated on February 25, 2011 that insurance carriers cannot refuse to convert a term policy to a permanent policy on the ground that the policy will be sold on the secondary market. The debated issue was whether the converted policy is a “new” policy that must satisfy the insurable interest requirement. Nevertheless, this ruling will not affect all term policies, since many term life insurance policies are not convertible. Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

Posted in Wealth Management | Tagged: , , , , , , , | Leave a Comment »

NCOIL Announces New Annuity Suitability Penalties

Posted by William Byrnes on July 20, 2011


Producers and carriers may soon face more stringent compliance requirements, and increased liability for making unsuitable recommendations, when selling annuities. The regulatory change will happen at the state level as a result of the National Conference of Insurance Legislators (NCOIL) executive committee voting unanimously on March 6 to adopt the National Association of Insurance Commissioners (NAIC) Suitability in Annuity Transactions Model Regulation.  Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of life insurance regulations in Advisor’s Journal, see NCOIL Adopts Model Act Requiring Insurers to Inform Consumers of Settlement Options (CC 10-104).

Posted in Wealth Management | Tagged: , , , , , , , | Leave a Comment »

Subsequent Divorce Decree’s Impact on Beneficiary Designation

Posted by William Byrnes on July 18, 2011


Which prevails when it is time to make a claim, a last in time divorce decree or a beneficiary designation made at the time of the application years ago?  A wife had her estranged husband, sign a separation and property-settlement agreement to release him from any claims to her estate or property.  When the wife passed away, her former husband sought the life insurance proceeds, as did her mother and son.  The answer is provided in a cautionary tale of beneficiary designations told in a recent 4th circuit case.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber)

For previous coverage of beneficiary designations in Advisor’s Journal, see The Effect of Divorce on Life Insurance Beneficiary Designations (CC 10-39) & Don’t Overlook Beneficiary Designations and Settlement Options (CC 09-28).

For in-depth analysis of beneficiaries and settlement options, see Advisor’s Main Library: D – Problems In Beneficiary Designations.

Posted in Wealth Management | Tagged: , , , , , , , | Leave a Comment »

Tax-Free Exchange Can Erase Policy’s Tax Benefits

Posted by William Byrnes on July 18, 2011


A recent IRS Revenue Ruling provides an important reminder for us of the rules for deducting interest that’s paid or accrued on a business life insurance policy loans. Knowing how and when policy loan interest is properly deductible can mean the difference between closing the sale in the first instance and an IRS audit down line if these rules are ignored.

In general, interest paid on a life insurance policy loan is not deductible for income tax purposes; but there are some exceptions for life insurance purchased for business purposes. The deductibility of policy loan interest has changed significantly over the past 20 years, so an intimate knowledge of the specifics is imperative when selling or transacting on a policy that’s issued to a business.  Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous Advisor’s Journal coverage of the exception to the pro rata limitation on interest deduction, see Obama Budget Would Undercut Utility of Life Insurance in Small Business Planning (CC-11-41).

For in-depth analysis of corporate-owned life insurance, see Advisor’s Main Library: D—Deductibility Of Business Insurance Premiums, E—Premiums As Taxable Income To The Insured & F—Taxability Of Corporate Owned Life Insurance Proceeds At Death.

Posted in Taxation, Wealth Management | Tagged: , , , , , , , | Leave a Comment »

Historical Performance of Underlying Cash Value of Life Insurance

Posted by William Byrnes on July 17, 2011


Last month, Advanced Market expert Barry Flagg talked about the relevance of policy cash values to the overall suitability of a permanent life insurance policy. This month, he expanded on the cash value topic by addressing how cash value is generally a product of the number of cash value investment options, the historical performance of such cash value investment options, and the cost-effectiveness of the various cash value allocation options.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of valuation in Advisor’s Journal, see Life Insurance Valuation (CC 10-09).

Posted in Wealth Management | Tagged: , , , , , , , | Leave a Comment »

Obama Budget Would Undercut Utility of Life Insurance in Small Business Planning

Posted by William Byrnes on April 11, 2011


The Obama administration’s 2012 budget includes an attack on corporate owned life insurance that could further erode its tax advantages and put a ding in carriers’ balance sheets.  Washington’s repeated assaults on corporate-owned life insurance seem to be motivated by its view of corporate owned life insurance as simply a tax arbitrage opportunity for big corporations, ignoring its importance for smaller businesses that rely on a few key people to keep them afloat.  Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For in-depth analysis of corporate-owned life insurance, see Advisor’s Main Library: D—Deductibility Of Business Insurance PremiumsE—Premiums As Taxable Income To The InsuredF—Taxability Of Corporate Owned Life Insurance Proceeds At Death.

 

Posted in Insurance, Tax Policy | Tagged: , , , , , , , | 1 Comment »

 
%d bloggers like this: