Life Insurance Agents' Ethics or Code of Conduct

Feb 12, 2007

  1. Guest
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    Guest Guest

    Hello,

    I have been doing a ton of reading on Missed Fortune.

    Just out of idle curiosity, I thought (maybe I dreamed it up) that it was either illegal or unethical for a life insurance agent to suggest an LI contract as an option to evade income taxes. I think I may have come to this conclusion when Prudential got itself in a jam in Florida getting retirees to cash in their WL policies in exchange for annuities (this was years ago).

    The more I read about this topic on the internet, I note that there are agencies that specifically advertise as helping to implement the doctrine aspoused in Missed Fortune. That is why I am wondering if I dreampt it up or if they posess some sort of license such as financial consultant or something in addition to being LI Agents.

    Thanks.
     
    Guest, Feb 12, 2007
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  2. somarco
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    somarco That Medicare Guy

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    Agents have to be extremely careful in presenting any life product as an "investment".

    Beyond that, tax evasion is illegal.

    Tax avoidance is not.
     
    somarco, Feb 12, 2007
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  3. Guest
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    Guest Guest

    Dang! I am very sorry. I did not in any way wish to suggest evasion. I was using the word strictly as a synonym with "avoidance." In any event as something perfectly open and above board. My apologies.

    Thanks Somarco
     
    Guest, Feb 12, 2007
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  4. Dave020
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    Dave020 Super Moderator Moderator

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    I thinks it's a standard 1035 exchange of cash value from one vehicle to another and is legal as long as the agent can demonstrate that it is a better fit for the client (in the client's best interest).

    CV buildup in life insurance is in conjunction with a death benefit, if the need for that large a DB no longer exists, it may be appropriate to move the client into an annuity and create an income stream with settlement options.

    Dave
     
    Dave020, Feb 12, 2007
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  5. somarco
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    somarco That Medicare Guy

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    Unless the rules have changed, I don't believe life insurance to annuity qualifies under Section 1035.
     
    somarco, Feb 13, 2007
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  6. Airborne1
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    Airborne1 Expert

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    1035 exchanges


    Not true

    1035 permissability

    LI to Annuity - okay
    LI to LI - okay
    Annuity to Annuity - okay
    Annuity to LI - NOT ALLOWED
     
  7. somarco
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    somarco That Medicare Guy

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    Since I don't write much life, never have, I will concede the point. Just going on memory, which is not what it used to be. Especially short term memory.

    Since I don't write much life, never have, I will concede the point. Just going on memory, which is not what it used to be. Especially short term memory.

    Since I don't write much life, never have, I will concede the point. Just going on memory, which is not what it used to be. Especially short term memory.
     
    somarco, Feb 13, 2007
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  8. arnguy
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    arnguy Guru

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    Airborne1 is 100% correct. It is the exchange of an annuity to life insurance that is prohibited. That would result in the total avoidance of taxes on the income produced inside the annuity (or evasion, if you prefer). Uncle Sam ain't gonna let that happen.
     
    arnguy, Feb 13, 2007
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  9. Guest
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    Guest Guest

    Can someone do this on a 1035

    From VUL to UL

    From VUL to WL

    Thanks.
     
    Guest, Feb 13, 2007
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  10. Airborne1
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    Airborne1 Expert

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    VUL to UL or VUL to WL

    Yes, of course.

    The real question would be why would you even consider it to begin with.

    More postings to come on Missed Fortune, since I'm snowed in today.
     
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