What Percentage of Key-Man Policies Are 101j Compliant?

[Justin Bilyj]

Anybody have a guess?

I saw this page suncrestadvisors.com/services-products/ and they claim their audit turned up 40% of non-compliance.

This to me is unbelievable. I wonder what the avg db is on some of these EOLI plans. You could be saving a company hundreds of thousands of dollars even millions in taxes!!

Is this a viable door opener into buysell, keyman, plans? Any other plans this would affect nqdc maybe?

This just freakin blows my mind that this happens, I would be fuming if this happened to my business. Are these E&O cases waiting to happen?

 

[DHK]

Is this a viable door opener into buysell, keyman, plans? Any other plans this would affect nqdc maybe?

This can be a wedge you can use to help differentiate yourself from the entrenched agent or other perceived competition.

Would it be an effective door opener? I don't think I would be calling businesses and asking this question. It's a little to esoteric and vague. Most will have no idea what you're talking about even if you explain the consequences.

Even then, business owners will want to know what your REAL angle is.

If it were me, I would offer a business life insurance audit FOR A FEE to help them gauge how well their policies are working and for compliance.

IARFC Business Owner Consulting Workshop

Are these E&O cases waiting to happen?

That depends on whose responsibility it is to inform the business about tax changes in regards to their policies. Is it the job of the agent? (It should be.) Is it the job of the insurance company?

 

[TwiLight]

Its more of the slippery slope you climb when selling cash value life for a Key Man policy.

Not usually an issue when selling a 20 yr term plan.

 

[VolAgent]

That depends on whose responsibility it is to inform the business about tax changes in regards to their policies. Is it the job of the agent? (It should be.) Is it the job of the insurance company?

Are you an accountant or CPA? Giving out tax advice is a dangerous game.

 

[DHK]

Are you an accountant or CPA? Giving out tax advice is a dangerous game.

Tax advice is different than disclosing a tax notification that relates to someone's policies.

Knowing how policies are taxed is important to disclose. Any competent agent should be disclosing all such material information so a client can make an informed decision.

That does NOT mean that you are giving tax ADVICE on how to deal with the IRS or how to file taxes.

As an example: how can you not talk about an IRA without giving a disclosure on how it works in relation to TAXES? You must disclose how it works.

Any advice must be given in context of the product or account being discussed. We do not give tax advice in the area of how to file taxes, how to dispute taxes, how to have effective dealings with the IRS... etc.

In addition, the reason for purchasing financial products/services is NOT primarily for tax purposes.

If I approached a business and said "I can save you a boatload on your taxes"... that is holding oneself out as a tax advisor and expert. Even if what you say is true and it's really estate planning that you're doing... you're holding yourself out as something that you are not.

Tax advantages are a by-product of our products/services. However, if the PRIMARY reason why someone is buying a product is for its tax benefits... we are not able to be liable for tax "advice" and that person should be referred to a competent, licensed CPA/accountant in their state.

 

[scagnt83]

Any advice must be given in context of the product or account being discussed. We do not give tax advice in the area of how to file taxes, how to dispute taxes, how to have effective dealings with the IRS... etc.

Exactly. We can talk about taxes with the client all day as long as it directly relates to the product being sold.

If you sell a key man policy and do not disclose the need for an employee consent form you are not doing your job.

If you are not disclosing the direct tax implications of the products you sell you are not doing your job.

If you are getting into how X product will save you Y on your taxes each year then you are no longer within the bounds of an agent.

 

[Justin Bilyj]

What about using terminology like "auditing your disability and life insurance" etc. for whatever reason be it beneficiary designations, 101j compliance for EOLI, lowest premium, etc.

I know of brokers on this forum who use that terminology and was wondering if that is crossing over the tax advice realm.

I remember seeing this on TGP using this as a door opener or to get beyond the gate keeper, regarding 101j compliance.

 

[pcbinsurance]

I think utilizing the word "review" is a better term than saying "audit" or "auditing".

 

[TwiLight]

Have you ever thought about hiring a CPA to do taxes for businesses as part of your services. Work a deal such as 95/5 to the CPA on fees and have them come to your office.

This system works very well with our Branch Offices.

 

[Justin Bilyj]

My best friend just left "the big 4" to pursue his law degree. We talk about doing joint work all the time and this was something we were discussing re 101j.