It’s A Shame For You Not To Find Money — When These People Do It So Easily

Times are tough and without money it can be a long cold winter until we have economic recovery in this country.

Enter the life Settlement - this is a strategy to take a non-productive or useless insurance policy and turn it into cash today so you can get in on the opportunity that is out there.

WHO BUYS THESE LIFE INSURANCE POLICIES?

Institutions continue to provide the majority of funds to purchase life settlement contracts.  Some more notable players who have participated include Berkshire Hathaway (Warren Buffett’s firm), Citibank, Credit Suisse, Goldman Sachs, Deutsche Bank, and Morgan Stanley.

WHAT KIND OF LIFE INSURANCE POLICIES ARE THE MOST DESIRABLE?

Universal life and term life insurance policies are the most desirable.

Term policies should still be within their conversion period for maximum value.  Whole life policies are also considered.

HOW SMALL CAN THE POLICY AMOUNT BE?

An amount of $250,000 and greater is preferred, however.

WHAT CAN I EXPECT TO RECEIVE FOR MY POLICY?

Life settlement offers have ranged between 10% and 40% of the policy’s face value. Some offers have been less and some higher—always dependent upon the health of the insured and premium costs.

WHO’S ELIGIBLE?

Eligibility is fairly straightforward:

• The insured must be at least 65 years of age (Age 62 if health is significantly impaired).
• The insured is not terminally ill or have a catastrophic illness.

HOW LONG DOES IT TAKE TO COMPLETE A LIFE SETTLEMENT?

It generally takes 6-8 weeks from the time a completed application package is received until funds are wired into the policy owner’s account.

If you would like to have your policy assessed for settlement please contact my office.

Some of the most common reasons for a life settlement are:

• The premium payments have become too costly
• You may no longer require the policy
• You may be considering the surrender of the policy or the policy may be about to lapse
• There may be a change in your estate planning needs
• You may have a need for liquidity
• You want to give a gift to a family member
• You may need to retire other debt
• You may want to purchase a new less expensive policy
• You may want to generate funds for charitable giving

Common Business Reasons:

• The “Key Man” insurance no longer needed
• The Buy/Sell insurance taken out for the business partners is no longer needed
• Increase liquidity needs for the business
• Eliminate company debt

Untaxingly,

James Burns, Esq.

“How to Save Your IRA from Destruction”

If you have an IRA and you’re concerned about how to pass it on to your loved ones, an approach of naming a trust as the designated beneficiary has several benefits over directly naming the beneficiaries. The issues that can affect the named beneficiary to name a few are they could be a minor, they might not be careful with money, or they may have marital or creditor issues, and could be disabled to the extent the inheritance would affect their governmental benefits. Next, if the beneficiary dies before distribution, the alternate beneficiaries may not be accurate. Another condition we often see is the beneficiary may purposely or accidentally withdraw monies from the IRA causing adverse tax consequences. Additionally naming the client’s revocable living trust as the beneficiary, even with the appropriate language that extends payout called “conduit provisions” may create issues with the age of beneficiaries in order to “stretch-out” the required minimum distributions.

However, in 2005, the IRS issued Private Letter Ruling 200537044 (the “PLR”) that approved a new type of revocable trust created solely to be the beneficiary of an IRA account. As a result of this PLR, it is now possible for you to create an individual trust known as an IRA Beneficiary Trust® which provides maximum protection and flexibility for your retirement investments.

This IRA Beneficiary Trust® insures that your beneficiaries will extend (“stretch-out”) their taxable Minimum Required Distributions (MRDs) on the IRA over a much longer period of time. By using this trust, the age of each beneficiary becomes the effective age for that beneficiary’s required minimum distribution. As an effect, the IRAs can continue to compound for many years free of income-tax and may literally grow to be worth millions of dollars! This type of trust goes by many names and has also been called an IRA trust, an IRA Inheritance Trust, a standalone IRA trust, an IRA stretch trust or an IRA protection trust.When your loved one/s inherit your IRA fund and they keep the funds in the IRA over their lives and only take the minimum required distributions each year (the “stretch-out”), the amount of money that can accumulate and be paid to them should be massive in comparison to taking the monies directly and facing the immediate tax on them. For example, assume you have a $150,000 IRA account; we will also further assume you have two different ages (10 and 25) for your beneficiaries and presume that the account averages an annualized 7% return. First, for the beneficiary who is age 35[i] and inherits IRA proceeds upon your departure, the total benefit is $1,212,165 of after-tax benefit as opposed to $663,496 for taking the proceeds directly without the stretch-out. For the 10 year old beneficiary,[ii] they will receive approximately $4,589,236 after-tax benefit as opposed to $2,641,198 which is what they would receive lacking the stretch-out because of the immediate taxes due when they receive your funds directly.

Therefore, you can see that this wealth amassing strategy only works if the beneficiaries hold the inherited funds inside the IRA account. If a beneficiary takes all of the funds out of the IRA account (referred to as a “blow-out” because it blows the stretch-out), this wealth accumulation technique is lost. One great reason to create an IRA Beneficiary Trust® is to preserve the stretch-out and prevent a blow-out. Unfortunately, we see this blow-out too often and it jeopardizes wealth that must be saved. Many times your beneficiaries will not be aware of the tax rules and their distribution choices, so they’ll withdraw from the IRA funds at the first opportunity or do a forbidden rollover. Even if you hope that your children or beneficiaries will do the right thing by keeping the funds in the IRA account for their lives to “stretch-out” payments, they may expose it to numerous threats and hope is not a planning strategy as I’ve indicated in my book “The 3 Secret Pillars of Wealth.”

Some of the threats come in the form of a divorce where your beneficiary’s spouse could seek half of the inherited IRA if they live in a community property state. The divorce rate is out of control and a huge numbers of inherited money has become a target for the ex-spouse. Even though inherited property is considered separate property it may become the only thing available and because divorces can be very costly and last for years, your beneficiary may succumb to the pressures of long and nasty divorce litigation and be willing to surrender a large portion of the IRA account just to settle the divorce.

If you have a reasonable IRA you want to pass down or don’t think you’ll need to live on your IRA you absolutely should be thinking about this strategy.

Untaxingly,

James Burns, Esq.