Professionals in our back office.....follow up from Roth Conversion meeting

This is why my confidence is through the roof!

The first section below is an email from my contact Erik S., CFP with the IRA clients, and the second paragraph is Darren's reply with validity that supports our recommendations for Erik's clients to consider using the IRA Legacy Plan.

Hi Darren,

It was great meeting with you today. Thank you for the time and information.

The only item I have questions on is the swapping out of the life insurance policy from the PSP in exchange for “cash”. Can you provide any IRS approved guidance on this or literature that shows the validity and discounting mechanism. I am not questioning its validity, but am just ignorant to this topic and want more information.

Gents,

Jason did a thorough explanation of Erik’s question. I am copying/pasting below:

I’ve outlined the answer to your question in depth so that you know that the processes and procedures we use are conservative, time tested and overseen by Andy Weinhaus, JD, LLM, CPA. Andy is the #1 Authority on this strategy in the US. He has been Sage’s & my General Counsel for almost 25 years. Andy on behalf of Met Life worked directly with the IRS and Department of Labor in 2002-2005 to codify the Prohibited Transaction Exemption Expansion of IRC 92-06 allowing a policy to be sold from a PSP to an ILIT without Transfer for Value in 2004.Plus, The Safe Harbor Revenue Procedure 2005-25 codifying valuation. Andy is available to all clients of Redwood Advisors & Affiliates who sign on with Lionsmark & Sage. He is present on all calls when the client has their CPA and or Attorney on the call for assurance and final approval.

We are not “Swapping-Out” the policy for cash. We are arranging an “Asset Sale” between the Trustee of the ILIT/GST Trust and The Trustee of the PSP. The arm’s length “Buy-Sell” is accomplished, and policy valued utilizing The IRS Revenue Procedure 2005-25 Safe Harbor Valuation. This codified Revenue Procedure is The Blueprint and Roadmap we use for all Survivorship policies, UL and IUL policies which we expect may be used for future premium financing. Indisputable valuation.

It’s important to note that the IRS allows two methods of valuation. One is Safe Harbor and the second is Fair Market Valuation. We utilize both well-established formulas. The decision to use FMV is based on facts and circumstances. Younger clients utilizing Fully Guaranteed Coverage most often use The FMV appraised approach.

Note: Survivorship Designed Legacy-IRA and Leveraged Legacy-IRA plans always use the Safe Harbor revenue procedure.

The Safe Harbor Revenue Procedure is an IRS Compliance Blueprint for policy valuation and is undisputable. I.e., clients are 100% safe in the event of an audit. It’s important to state that none of our clients have EVER been audited. Andy Weinhaus, JD, LLM, CPA has overseen literally thousands of plans. Only one audit in over 20 years.

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