Thursday, June 10, 2010

Buy-Sell Funding via Partnership-Owned Life Insurance

http://ezinearticles.com/?Planning-Opportunities-With-Partnership---Owned-Life-Insurance&id=4136764


Buy-Sell Funding
Another planning opportunity for partnership-owned life insurance deals with buy-sell agreements. Buy-sell agreements for corporations with more than two shareholders create several potential problems. First, with the popular cross-purchase or wait-and-see buy-sell agreement (so that the surviving shareholders receive a stepped-up basis in their shares and a C corporation avoids paying the Alternative Minimum Tax), either a trusteed buy-sell arrangement must be used or multiple policies must be purchased (i.e., each shareholder must own a policy on each other shareholder's life). For example, with four shareholders, you would need 12 policies. Second, a transfer-for-value may occur at the death of a shareholder as the deceased shareholder's interests in the surviving shareholders' policies are purchased by the surviving shareholders. If so, a portion of the insurance proceeds will be subject to income taxes. IRC Section 101(a)(2).
To avoid both of these problems, the shareholders could form a general partnership or limited liability company to own the policies with which to fund the corporate buy-sell agreement. Similar to a trusteed buy-sell arrangement, only one policy per shareholder is needed. The partnership / operating agreement will provide that any life insurance death proceeds be specially allocated to just the surviving shareholders. At the death of a shareholder, there will be no transfer-for-value problems, because the transfer of policies to a "partner" of the insured is an exception to the transfer-for-value rule. IRC Section 101(a)(2)(B). In addition, partnerships and LLCs are not subject to the Alternative Minimum Tax.

Julius H. Giarmarco, J.D., LL.M, is the Chair of the Estate Planning Group of Giarmarco, Mullins & Horton, P.C., Troy, Michigan.

Wednesday, May 26, 2010

ILITs: Not So Simple

Marty Shenkman shows there's more to think about than you might think when planning based on a "plain old" Irrevocable Life Insurance Trust in this article he wrote in 2009. Among the issues he raises:

  • Trustee Selection
  • Trust Situs
  • Reciprocal Trust Doctrine
  • GST Exemption
  • Divorce Risk
  • Crummey Powers




Tuesday, May 11, 2010

ASPEN member exclusive resource: ALIRT Insurance Research

Ash Brokerage has negotiated an arrangement with ALIRT Insurance Research L.L.C. to make it's core offering available to producers affiliated with Ash Brokerage. ALIRT Research specializes in the analysis of insurance company financial performance trends. Its proprietary model provides a detailed look at an insurer’s statutory and GAAP financial results on a quarterly basis. This on-going insight into underlying financial trends allows distributors and buyers of insurance products to anticipate financial stress and/or rating downgrades of insurance partners before they happen. 

The ALIRT Service alerts clients to the development of positive and negative trends impacting financial performance of insurance companies relative to specific competitors and insurance industry market sectors.

The ALIRT service consists of quarterly customized reports on a client universe of carriers and includes the following:
  • Quantitative and qualitative ALIRT model relative analyses on any insurance company issuing statutory financials in the U.S.
  • Five-year trends in ALIRT scores, flags, and ratings for a client’s group of insurers and industry composites
  • Executive summaries of financial results for “outliers” based on customized criteria for due diligence financial performance screens
  • Development of additional customized screens for client’s proprietary use
  • Access to ALIRT Research staff for credit committee conference calls, informational requests, special projects, etc.
  • Series of white papers on insurance industry sectors, line of business performance, investment performance, and/or exposures, credit issues and risks related to specific insurers/markets.
In addition, Ash Brokerage has negotiated exclusive access for ASPEN Group producers to the following:
  • Two-page analyses on scores of selected insurance companies issuing statutory financials in the U.S.
  • Summary pages detailing five-year trends in ALIRT scores, ratings, and a wide range of financial metrics and benchmarks for a defined group of insurers and industry composites.
  • Access to ALIRT Research staff for presentations to COIs, HNW clients and their advisors, etc.

To learn more about the value of independent, arms-length due diligence and monitoring of the underlying financial strength of insurance carriers, please contact the ASPEN Group at 888-553-5563.

ASPEN member Dan Nigito published online

ASPEN member Dan Nigito  was recently published on the National Underwriter’s website LifeandHealthInsuranceNews.com.

His article, Charitable Leverage: A New Paradigm For Life Insurance and Charitable Remainder Trusts, outlines Dan’s strategy for changing the traditional paradigm of using a CRT and insurance as an estate planning tool to one of using the CRT and insurance as a retirement planning tool.


Congratulations, Dan!