Deborah Jacobs, the author of this Forbes article, always does an excellent job explaining things that clients sometimes find difficult to understand. You might want to share this article with clients who are or should be considering GRATs. Enjoy your day!
 
Al, in working with you I have found you to be, thorough, organized, concise, responsive and timely. You also are knowledgeable and communicate that knowledge well so that it becomes understandable. I would also consider you more business-like / professional than “folksy.”
As to whether that makes you unique, it is when you are compared to some folk I have had the “pleasure” of working with, but when I choose the people to work with; I look for these characteristics in all of them especially if we are to continue working together.
~ Estate Planning Professional
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The Manhatten United States Attorney and the Federal Bureau of Investigation have charged three insurance agents with a $100 million fraud scheme involving stranger-owned life insurance or STOLI.
Typically, people buying a life insurance policy have some relationship to the person being insured. In contrast, with STOLI arrangements, a policy is bought with the intent to resell it to a third-party investor. Many insurance companies won’t allow this, and in varying degrees state laws prohibit it.
In an indictment announced Feb. 16, federal authorities accuse three agents–Michael Binday, 48, the president and owner of a Scarsdale, N.Y. insurance agency; James Kevin Kergil, 57, an insurance agent based in Peekskill, N.Y.; and Mark Resnick, 56, an insurance agent based in Orlando, FL–of conspiring to defraud major insurance companies into issuing life insurance policies to straw buyers, when the true owners of the policies were third-party investors and financiers. All three agents have been arrested.
The insurance companies referred to in the case are: American General Life Companies; Lincoln Financial Group; Security Mutual insurance Company and Union Central Life Insurance Company.
The policies involved were universal life policies, which combine an investment component with a death benefit–an amount paid to beneficiaries when the insured dies. Life insurance companies routinely take the position that the death benefit should correspond to the amount of money that the insured’s dependents would need to replace lost earnings or to cover estate taxes and other expenses. When issuing the policies they rely on information provided about the applicant’s financial condition and income.
In a statement announcing the indictment, Manhattan U.S. Attorney Preet Bharara said that the three insurance agents “concocted an elaborate scheme, using straw buyers and third-party agents, to deceive life insurance providers into issuing policies to unintended beneficiaries. And when their scheme was unraveling, they allegedly sought to throw investigators off the trail by destroying documents and telling other individuals to lie. Their alleged actions victimized the companies that issued these policies, and hurt the grand jury process.”
According to the indictment, the agents recruited elderly clients of modest means to serve as straw buyers and apply for universal life insurance policies. In exchange, the agents would pay them when the policies were resold.
Meanwhile, the agents did the necessary paperwork, misrepresenting key elements of the application. For example, they stated that the straw buyers were worth millions, although almost all of them had a net worth of well under $1 million. They shifted money around to make it look like the buyers were paying the premium themselves, while in fact it was coming from third-party investors.
While the applications stated that the buyers did not intend to sell their policies after they were issued, the agents had already made arrangements to sell them on the secondary market. All this generated hundreds of millions of dollars worth of commissions for the agents.
As the indictment notes, insurance fraud hurts companies because it leaves them holding the bag in a bad business deal. And that indirectly hurts consumers because companies must raise their premiums to make up for lost profits.
The indictment describes misrepresentations at every turn, in some cases starting with the system for recruiting straw buyers. Resnick, one of the agents, advertised burial insurance and then persuaded consumers who responded to the ad to buy life insurance instead.
These are classic elements of STOLI schemes, says Stephan R. Leimberg, a life insurance expert and president of Leimberg Information Services, a publishing and software company. For more than five years they have proliferated with the vibrancy of the secondary insurance market, he explains; agents get one commission when they first issue the policy, and another when they resell it.
But in a number of respects the latest case is unusual, Leimberg adds: criminal charges have been brought; the insurance agents have been arrested; the FBI is involved; and obstruction of justice charges have been filed. As federal authorities got wind of what was happening, the agents allegedly destroyed documents and computer files.
Edited and summarized from Forbes article authored by Deborah Jacobs
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On Monday, the Obama Administration released its Fiscal Year 2013 budget and for the third consecutive year, the proposal contains tax and reporting provisions that would impact life insurers, owners of COLI policies, and estate and gift planning. Regarding the latter, the budget proposes to permanently set a top rate of 45% with estate tax and GST exemptions of $3.5 million and a gift tax exemption of $1 million. Unified estate and gift tax credits would therefore not be maintained, but the portability of unused credit would be made permanent.
AEG Financial Services
Many financial events in your business and personal life can influence your tax position over a period of years. That’s why it’s so crucial to obtain expert advice on tax and estate planning strategies available to you.
Albert E. Gibbons works with you and your other advisors to develop sound and innovative solutions for your business and personal estate planning challenges. Many of the advisors we work with hold a master of tax and, or master of accounting degrees. We’re always up to date on the current tax laws, latest tax changes, regulations, and complex tax codes that can affect you.
By working with you and your advisors, our life insurance strategies along with the tax planning strategies of your advisors enable us to provide you with the best solutions for your needs.
AEG Financial Services
