“Once again, the courts have put practitioners on notice. A plan that reflects tax consequences or a tax strategy described in the IRS’s published guidance will be considered a tax avoidance transaction. Likewise, if the taxpayer knows or has reason to know that the taxpayer’s tax benefits are derived directly or indirectly from tax consequences or a tax strategy described in published guidance, it will fall within the same purview.”
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“The Administration’s proposed tax rate increases would significantly alter the investment and planning behavior of HNWIs, potentially increasing the need for planning to mitigate and manage income tax liabilities….These proposals only reflect a Presidential “wish list” for future tax legislation and cannot take effect without Congressional approval, which may be difficult to achieve with a Republican-controlled Congress.”
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“On January 15, 2014, The Standing Committee on Unlicensed Practice of Law of the Florida Bar Association submitted a request for formal advisory opinion from the Florida Supreme Court on whether it constitutes the unlicensed practice of law for a non-lawyer to engage in the following Medicaid planning activities leading up to the Medicaid application:”
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“Advisors to qualified retirement plan sponsors and fiduciaries can assist their clients in looking at life insurance as an additional investment option. Careful advice and planning is necessary because of the special requirements applicable to life insurance under qualified plans.”
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VERY IMPORTANT:
Issues in Personal Life Insurance Planning
As a follow up to Part 1, this Bulletin highlights and provides suggestions for dealing with common income tax issues that arise in personal life insurance transactions, including: (1) policy loans, (2) the use of modified endowment contracts (?MECs?), and (3) the transfer for value rule. Recognizing the issues and understanding the applicable rules can minimize unexpected tax consequences and avoid problems, like phantom taxable income.
VERY IMPORTANT:?
Issues in Personal Life Insurance Planning
Life insurance planning has become more complicated as the products become more complex, the tax laws remain uncertain, and the marketplace grows more advanced. This complexity requires a much higher level of sophistication in planning and can lead to hazards and unexpected tax consequences for the inexperienced.
The proper purchase, transfer, funding, and on-going management of a life insurance policy requires the collaboration of an expert team of advisors (producers, lawyers, financial planners, accountants, etc.) and a clear process for implementation and post-closing administration.