Annuity and Life Insurance Arbitrage

[Sam]

Joe Belth has some interesting insight into SOLI (another term used for this kind of transaction).

http://209.85.165.104/search?q=cache...lnk&cd=8&gl=us

Other sites of interest include

http://www.pgdc.com/usa/item/?itemID=238024

http://www.rightrates.com/wealthtransfer/arbitrage.php

Great resources, by the way.

 

[somarco]

I have a friend in Knoxville who has written a few 412i plans. He always has been an elephant hunter. Feast or famine with him.

http://www.newyorklife.com/cda/0,3254,14001,00.html

http://www.definedbenefit412i.com/

http://www.assetprotectionbook.com/412i_defined_benefit_plans.htm

and this last one is most interesting . . .

http://www.quatloos.com/412i-defined-benefit-plans.htm

 

[James]

and this last one is most interesting . . .

http://www.quatloos.com/412i-defined-benefit-plans.htm

Obviously your last link is to a group or person that doesn't know what they are talking about:

A “section 412(i) plan” is a tax-qualified retirement plan that is funded entirely by a life insurance contract or an annuity. The employer claims tax deductions for contributions that are used by the plan to pay premiums on an insurance contract covering an employee. The plan may hold the contract until the employee dies, or it may distribute or sell the contract to the employee at a specific point, such as when the employee retires.

The fact is a 412i plan has to be an Annuity, yes you can funnel up to 50% at most into a LI Policy and that is it. I read the story and it sounds like they are confusing several plans into one.

 

[Sam]

There is a lot of literature on 412 plans that are funded entirely by life insurance. It is not how it is traditionally designed, but there is no exact treatment for it. Peter Katt has been railing against it for a while.

 

[somarco]

Perhaps, since the link refers to what the IRS considers abuses of the system, the proposed regs are directed at stemming some of the abuses by those who take liberties in their marketing efforts.

I can't imagine anyone doing that. Any more than I can imagine seminars that promote using annuities to hide assets in an attempt to gain Medicaid benefits.

 

[James]

Perhaps, since the link refers to what the IRS considers abuses of the system, the proposed regs are directed at stemming some of the abuses by those who take liberties in their marketing efforts.

I can't imagine anyone doing that. Any more than I can imagine seminars that promote using annuities to hide assets in an attempt to gain Medicaid benefits.

I couldn't imagine something like that happening!

 

[honestagent]

This is something mostly different. It does have the element of buying an existing policy, but that is where the similarity ends.

A settlement is for an existing policy. This scenario creates the policy for its own purposes.

Thanks for the response.