Client W/Chpt 7 Wanting to Overfund IUL

RonRoberts

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Chp 7 not fully discharged until 2016. Looking for a company that will take this healthy client minimum non-mec overfunding IUL. Any ideas? Thanks.
 
To me this sounds like this fella wants to salvage some cash from the business and protect it from creditors. Since I am in no way qualified to offer legal advice, I suggest consulting with a bankruptcy attorney to get an idea of how the courts would view such a transaction.

Andy
 
Business BK is Chapter 11, not a Chapter 7.

First, will IUL companies issue the policy to someone with an open BK filing? Check with your IMO/BGA/MGA/EIEIO. You'll want to check on that first, particularly since the BK won't be discharged until 2016... and the suicide clause is only 2 years on most, if not all, policies. If he's planning a suicide, he could do it in 2015 and use all the insurance company's money to pay off his BK. The company won't want to have that risk.

Second, I *think* that while the BK is open, any and all spending above living expenses will be scrutinized very carefully - regardless of if it's a 7702 plan (life insurance) or 401 or 408 (IRA). This is an area of the law and will require that he speak to his BK attorney for specific legal advice.

This comes AFTER finding out if there is an IUL company that would issue the policy in the first place for the reasons that I mentioned.
 
I agree with DHK. This sounds like a case of trying to close the barn door after the horse has already left. He needs life insurance, he doesn't NEED to overfund an IUL policy. So I would imagine the trustee might have some questions on that. Also, is this a lump sum? He may be trying to move assets to protect it from the bankruptcy.

Fortunately, none of it is your concern. First see if you can even find someone to take him. Then do the paperwork and don't be surprised if the trustee kills it. Just make sure to dot your i's and cross your t's along the way. Keep good notes on everything in case someone has questions for you. But really, I wouldn't put a lot of effort into it. There is too much going against it.
 
You can probably get some companies to accept him, but rather than going in as an IUL that will prompt all the above questions, why not go in as a term policy, and convert it afterwards to the permanent insurance you want?
 
You can probably get some companies to accept him, but rather than going in as an IUL that will prompt all the above questions, why not go in as a term policy, and convert it afterwards to the permanent insurance you want?

You'll have a much easier time going this route. The only concern might be that it is still open. Although, I've heard the biggest worry about bankruptcy is not suicide, but that the person won't pay the premium and it will lapse.
 
Sounds like a case that has little chance of being placed, based on the motivation of the proposed insured. He doesn't want insurance he wants a vehicle to avoid creditor actions. Had this planning session been done a year before he contemplated the biz bk (Ch 11) then the above would have been possible. Since it seems that he is in process with the legal process any attempt at putting such a plan in place could violate Fed Bk laws. Bk Fraud is a serious crime and is usually punishable by several years or more at Club Fed. (seen it happen to a few folks who thought they were cleaver mofo's). I wouldn't get involved in such a case or else you're apt to be providing depositions for a pitance.
 
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