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Planning in Uncertain Times

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An article by Bob Finnegan, J.D., CLU®, HCB Senior Vice President, Advanced Sales Attorney, published in Steve Leimberg’s Estate Planning Newsletter on December 20, 2016.

Since at least 2001 when the estate tax was renamed the “death tax,” transfer taxes have been a political football. With the election of Donald Trump and a 51-member majority in the Senate, the possibility of repeal has become more likely. Much of the commentary has taken repeal as a given.  But is repeal likely? And if the transfer taxes are repealed, what is the likelihood that repeal will in fact be permanent?  And most importantly, how do we advise our clients in the face of all of this uncertainty?


Understanding Indexed Universal Life Returns

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Many individuals assume that Index Universal Life (IUL) crediting rates (“Indexed Returns”) and the equity returns of the underlying fund (for example, the S&P 500 Index) to which they are linked closely track each other.


Department of the Treasury Issues Proposed Regulations to Eliminate Discounts for Family Controlled Entities

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New Proposed Section 2704 Regulations were just released by the Department of the Treasury and were published in the Thursday, August 4th Federal Register.


Private Financing #2

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Private Financing is a strategy to pay for a life insurance policy owned by an Irrevocable Life Insurance Trust (ILIT) for estate planning purposes with no gifts and hence no gift tax costs. Traditionally, Private Financing has been promoted with a 10-pay policy and a 9-year note on the theory that using the low Mid-Term AFR is the best option. This is the second piece in a series on Private Financing strategies.

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Premium Financing: Practical Considerations

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Premium financing is a very powerful planning tool when properly and responsibly constructed and administered. It can mitigate gift taxes and reduce the cost for a traditional permanent policy. Even in less than perfect economic scenarios, with less than optimal policy and loan performance, proactive management can help ensure that a premium financing program stays on track.

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Important & Favorable Tax Court Split Dollar Ruling

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On April 13th, 2016, in Estate of Morrissette, the US Tax Court ruled in favor of the taxpayer in a generational split dollar situation. Following Mrs. Client’s death, the IRS assessed a gift tax deficiency of $13.8M and penalties of $2.7M. Ruling in favor of the taxpayer, the Court determined that a dynasty trust’s only economic benefit under the agreements was the current cost of life insurance protection. Note: This case did not address the valuation aspects of the estate’s interest in the generational split dollar plan.

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Private Financing #1

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Private Financing is a simple and powerful strategy for funding large life insurance policies with no gift, estate or even GST taxes. Current low applicable federal rates (AFRs) allow clients to lend funds to an irrevocable trust such that the earnings on loaned funds are sufficient to pay annual premiums and repay the loan plus accrued interested at the end of the note term. This is the first post in a series of Private Financing strategies.

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