- 2,194
How much errors and omissions insurance do you have?
Ethical Concerns or No
- Thread starter karaudio
- Start date
- 15,041
I take it that you haven't done your AML or at least didn't pay attention.
How is he going to pay for the policy, you said he doesn't believe in the banking system, does he have a bank account? If not, the insurance company is not going to accept 20k a year in premium in cash or money orders. How he earns his income is irrelevant. If it is not reported and he is not paying taxes on it, then it currently isn't part of the legitimate money stream. He will have to get it back into it and you would be a part of it through the insurance policy. You will be opening yourself up to liability here and E&O isn't going to do a thing in this situation.
If he does have a bank account, then his troubles with the IRS are just that. They aren't yours. However, you are still probably going to have problems with the financials. 500k in face amount won't raise any eyebrows, but 20-36k in annual premium will. You could just hope they don't ask for financials and tax returns to back them up.
Whatever you do, you should make sure you have no notes that you suggested this as a method to park his money and avoid any issues with the IRS or taxes.
How is he going to pay for the policy, you said he doesn't believe in the banking system, does he have a bank account? If not, the insurance company is not going to accept 20k a year in premium in cash or money orders. How he earns his income is irrelevant. If it is not reported and he is not paying taxes on it, then it currently isn't part of the legitimate money stream. He will have to get it back into it and you would be a part of it through the insurance policy. You will be opening yourself up to liability here and E&O isn't going to do a thing in this situation.
If he does have a bank account, then his troubles with the IRS are just that. They aren't yours. However, you are still probably going to have problems with the financials. 500k in face amount won't raise any eyebrows, but 20-36k in annual premium will. You could just hope they don't ask for financials and tax returns to back them up.
Whatever you do, you should make sure you have no notes that you suggested this as a method to park his money and avoid any issues with the IRS or taxes.
- 29,485
I don't think many companies will worry too much about financials on that case. At least in my experience I haven't seen it.
Now that doesn't mean I'd write the case.... I'd need to know more info on that (which obviously it sounds like the OP has).
- 4,132
At this point I would ask underwriting what to do of the company you hope to place him. Get a list of what they want and need to complete underwriting. Tell them what's going on and see if they will touch it?
I have a feeling they will say no, they won't do it. It has been made very clear to insurance companies that anything that resembles money laundering that they accept will cost them a great deal.
At this point, most here are saying walk away from it. If you choose not to, then share your story with underwriting and let them decide if they will do it.
Don't hide anything about the deal. Be transparent with underwriting, because if they decide to do this and it goes south, it's on them not you for withholding information.
I have a feeling they will say no, they won't do it. It has been made very clear to insurance companies that anything that resembles money laundering that they accept will cost them a great deal.
At this point, most here are saying walk away from it. If you choose not to, then share your story with underwriting and let them decide if they will do it.
Don't hide anything about the deal. Be transparent with underwriting, because if they decide to do this and it goes south, it's on them not you for withholding information.
- Thread starter
- #16
Thanks for all the feedback! They do have traditional bank accounts, mortgage ect. I'll show them some options, document, document, document and also call underwriting just to cover all angles and make sure they are aware of what I am. Ps the comment on disliking the traditional banking system was very vague on my part. What I mentioned to them based on our conversation is that the flexibility of a well designed wl contract would likely be appealing for the easy access to cash values. Similar to how Nelson Nash suggests the concept of using well funded dividend paying wl to essentially become your own banker.
davephx
Expert
- 54
He should be more concerned about spending 10 years+ in prison. He will have huge penalties and interest in addition to tax once he is found out. Can not discharge in bankruptcy but may able to do a Settlement Agreement but probably ONLY if he comes forward himself without being found. If found almost certain prison time.
Any transaction that generates a 1099 or tax reporting could trigger the IRS computers finding him. IRS will take all assets and that of wife if married with joint return. Home will have a tax lien. Your professional advice should be to immediately file all back returns which if done voluntarily may avoid prison.
Any transaction that generates a 1099 or tax reporting could trigger the IRS computers finding him. IRS will take all assets and that of wife if married with joint return. Home will have a tax lien. Your professional advice should be to immediately file all back returns which if done voluntarily may avoid prison.
- Thread starter
- #18
Yes, I suggested getting a tax attorney with considerable experience negotiating with the irs.
- 5,290
I don't understand the issue here. If you don't work for the IRS, and you aren't his CPA, then why are you concerned with how he pays his taxes? I stay away from any conversation with the client that involves anything other than their insurance. It's always the same "I'm a licensed insurance broker, not a (insert industry vertical here)". If I am missing something here, let me know. But I don't like giving advice or sticking my nose into places it doesn't belong.
- 11,275
It's called a fact-find and in being comprehensive in one's advice. And yes, you would need to know the consequences of someone trying to "hide assets" from the IRS.
Tax avoidance is legal. Tax evasion is not.
Otherwise, if you want to avoid all such conversation along these lines... stick to selling term insurance.
Tax avoidance is legal. Tax evasion is not.
Otherwise, if you want to avoid all such conversation along these lines... stick to selling term insurance.
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