This was originally published on June 3, 2013, and it continues to be one of the most-discussed topics we’ve covered during those years.
The idea continues to be teased and promoted actively by Tom Dyson and his folks at Palm Beach Letter, sometimes using different names, so we’re re-posting it for those new readers who might be interested… the idea is now sold partly as a secret strategy used by Warren Buffett, Joe Biden, Wall Street Bankers, and other notable names… but the basic idea and the type of “bank on yourself” life insurance policy they’re pitching is unchanged (yes, I expect Buffett probably has some whole life insurance, since essentially all wealthy people use life insurance as part of their estate tax planning, and Berkshire Hathaway has engaged in life settlements/secondary life insurance investments in the past).
While you’ll still sometimes see it teased as the 770 Account, or as the “World’s Most Notorious Asset,” it’s mostly now being teased as the “702(j) Account” (just another mysterious-sounding number, like 770, that refers to the part of the IRS code that deals with cash-value life insurance)…
…the story otherwise hasn’t changed much, here’s our original article…
—-from 6/3/13—-
“Imagine an account that…
“Lets you retire 100% tax-free
“Is NOT reportable to the IRS
“Pays you an average of 5% per year
“Has paid out, on average, for 121 straight years
“And which, unlike traditional retirement plans like IRAs and 401(k)s, lets you withdraw money anytime you like, for whatever reason you like, and with no penalties whatsoever.”
That’s what Tom Dyson and a few other folks who sign their promo letters are promising in the latest pitch for the Palm Beach Letter, which he publishes with Mark Ford. It’s all about an account that’s been used by the uber-wealthy for generations, and by “at least six different U.S. Presidents,” including John F. Kennedy and FDR, whose pictures grace some of the ads to provide gravitas, to generate “IRS-exempt” income for retirement.
So what’s the story? Well, Dyson calls it the “770 account” to make it seem mysterious (why else, of course, would you buy the newsletter?), but, frankly, it’s plenty mysterious on its own even if you don’t give it a sneaky name. More on that in a moment.
In fact, this kind of “Account” is already being touted by lots of skeezy-sounding infommercials and books whose promises make you very suspicious — they come with names like “Bank on Yourself” and “Infinite Banking.”
That’s not to say that any of the heavily marketed versions of these plans are skeezy, just that their promises give me that feeling, and the numbers and specifics for plans like this come usually only when you’re sitting in an office with an agent. “Skeezy”, by the way, is defined by your friendly neighborhood Gumshoe as a combination of “sketchy” and “sleazy.”
But what they’re talking about with those plans, and what Tom Dyson is pitching for his newsletter, is life insurance.
Not just ordinary term life insurance like most people under 60 carry, though — we’ll get to that in a minute. First, a bit more of his tantalizing teasing:
“Manhattan’s Secret Vault: Why Wall St. has kept this powerful secret hidden from you
“There’s a very good reason you’ve never heard about the “770” account before:
“That’s because Wall Street doesn’t want you to know about it!
“And neither do the big banks too, for that matter. (More on this in a minute.)
“Now, even though this is the investment account The Wall Street Journal is on record as saying is better than 401(k)s and IRAs… the majority of Americans don’t know it exists.
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“Well here’s a clue…
“I just got off the phone with an insider who works in the 770 industry. This person has worked first-hand with one of America’s biggest financial gurus (a name you’d instantly recognize), as well as several employees from Goldman Sachs and other big investment banks.
“And this is what this person said to me: NO ONE in Wall Street has their money in stocks—many of them are invested instead in ‘770’ accounts!
“Now, consider what this means…
“Here are the same investment professionals who’ve been telling us for years to “buy stocks”… and meanwhile… they’re all putting their money somewhere else!
“Ridiculous.
“Can you imagine the outrage this would create if most people found out about this?
“That’s why you’ll never hear your broker mention this investment to you, no matter how much money he (or she) has parked into it.”
We get a lot more in Dyson’s ad about the safety of these plans, and about how the big banks have tons of their own capital tied up in these plans (that’s true, by the way — banks have massive life insurance assets called “bank owned life insurance” or BOLI, they take it out on their top employees and it’s a large portion of their core capital), and Dyson’s reiteration that he has been putting increasing amounts of his own family’s money (20% of his net worth) into these accounts and getting a safe 5.5% yield … and it’s money that he can take out whenever he wants to by borrowing against it without penalties.
So what he’s talking about is not just life insurance, but probably a specific class of permanent life insurance that’s called “whole life.”
And it’s not really life insurance, not in the way those of us with term life insurance policies think of it (making sure your family’s not destitute if you die when your kids are young, or your mortgage has 20 years to go), it’s more of a wealth protection and tax-avoidance savings policy.
Whole life insurance is an agreement between you and an insurance company that they will pay out a certain amount of money when you die, and the agreement never expires as long as you keep paying the premium. That obviously means the premium is far larger than with a term life insurance policy, since a term policy expires at some point — term life insurance almost never pays out, so it’s cheap. You can pay $25 a month for $500,000 of 20-year term life insurance if you’re 35 years old, which is obviously cheap, but that’s because you’re young and healthy and the insurance expires when you’re 55, well before you reach the highest mortality risk years.
Whole life insurance does have that insurance portion, in that if you die in the early years of the policy there’s a death benefit that probably exceeds the money you’ve put in. But it’s not really for that — it’s set up to accumulate your death benefit over time. So if you want a $500,000 policy and the actuaries think you’ll die in 35 years, your premiums plus whatever returns the insurance company can earn on those premiums will have to add up to $500,000 in that length of time, plus whatever the insurance company wants to make as a profit. Life insurance companies do not generally do crazy investing or earn great returns in times of low interest rates, and they know pretty precisely when their insured people will die (for a large group, on average) so your premiums would likely be pretty stiff.
But that’s if you’re thinking about it as insurance — much of your premium goes into building a cash value for the insurance policy, and if you buy your policy through a mutual insurance company (like State Farm, or many others) that’s owned by the policyholders, and you get a “participating” or dividend-paying policy (meaning you get a dividend from the insurance company when they make money), then your cash balance can compound nicely and provide what are effectively decent investment returns that are indeed tax-advantaged. I don’t know whether the 5.5% gain that Dyson is expecting is typical or not.
Life insurance is often used by families who have some wealth to pass some of that wealth down to the next generation without taxes, and it doesn’t have accumulation limits that I’m aware of, like tax-advantaged retirement plans that restrict the amount you can put in every year — for most people contribution limits are a theoretical concept, but for the upper middle class and the wealthy the cap of 25-50 thousand a year across various retirement accounts is a bother.
So the key aspects of this, from what I can tell, are that you would want to buy whole life insurance, that you would want to have a participating or dividend-paying policy, and maybe even, if Dyson is following the same track as folks like the “Bank on Yourself” people, that you want to maximize the amount of savings you put into the plan (these are often called “paid up additions”) to increase your potential dividends from the mutual company and the growth of the account over time. The maximizing and “be your own bank” stuff is all about putting so much of your net worth into these policies that you do all of your big purchases (like buying cars, etc.) by borrowing from your policy. But of course, to do that you have to be the kind of person who can put a substantial amount of money aside for these large premiums as your “forced savings” plan.
And the reason it’s confusing, even if you don’t call it a “770 Plan”, is that these are complex contracts, they’re not standardized across different insurance companies, and from what I can tell you can only really buy them through an agent, whose commission structure may drive him in a different direction than you want to go. There are many, many variations and riders on these policies that I have only seen briefly mentioned, and I don’t know how most of them work — I suspect that they’re difficult to compare across providers, which is a hallmark of most commission-driven, hidden fee businesses.
Life insurance has a reputation for being riddled with fees, and for permanent life insurance and whole life insurance like this, the articles I’ve read suggest that most of the policies start to make sense after 10-15 years, but they suck up substantial costs and fees that mean you might lose out if you needed to try to pull your money out before that. This is a small segment of the insurance business that’s focused mostly on the wealthy, and the stuff that Dyson seems to be talking about is probably better handled with agents who are specialists in this … preferably those who don’t also happen to market a skeezy “secret plan.”
That is an extremely non-expert view. I don’t have a policy like this and I have not researched them fully, I’m sure there are people with whole life plans and probably agents who sell these plans out there in the great Gumshoe readership who could probably explain it better (feel free to use our friendly little comment box below) — all I can tell you is that Dyson seems to be teasing participating/dividend-paying whole life plans as his “770 plans” (and no, I don’t know what the 770 refers to), and they are real, and I don’t know whether they’re a good idea for you or not.
P.S. As of November 2013 this is now also being teased as “The ‘Underground Wealth’ Account: How to Fund Your Own Worry-Free, 100% Tax-Free Retirement” — these “accounts” were pitched in a different Palm Beach Letter teaser ad that was mostly about silver, I covered that one here on November 7.
My dad was 96 when I bought one of these contracts for him to own. In our case, grandpa is insuring the youngest grandchild who was 22 at the time, so the actual premium for insurance was very low. It is a paid-up policy, where all the premium was paid up-front, and the policy break even was less than two years (we passed that point 7 months ago). It guarantees a return of 2.6+% plus an added dividend of about 2%, a rate not guaranteed, but varies with performance. So far, the insurance company has met the mark for the first two + years. Since dad is living on his Social Security check in a nice one bedroom condo (he still drives his car), he pays no tax on the dividend. This is an AAA company, who also has given us the right to surrender at any time without penalty which was important when I pay out his estate. Yes, there were risks because of dad’s age, but we are past that now given the measly return in treasuries and bank CDs or savings accounts. Dad calls every August and says, “You’re not going to want to hear this, but I got my driver’s license extended on more time.” Go dad.
By the way, the turkeys at Wall Street Daily are now pitching this as the BABYLONIAN MONEY CODE. http://pros.palmbeachgroup.com/1501PBLNOTASSET/MPBLR505/?a=24&o=25674&s=30163&u=2178677&l=405701&r=MC&g=0&h=true
How good can the advice be when the news writer is copying a two year old idea?
Tom Dyson via Doug Casey’s organization most recently describes this “secret” as: “The Babylonian Money Code” also hinting at “Title 26 of the US IRS code” being used to exempt the owner from taxes. It is now being presented as some “discovered” secret wealth builder of the Rockefellers, Roosevelts and Clintons fortunes. As I know it, it is Whole Life Mutual Insurance, purchased at as young an age as possible, (even 2 years); but normally 18 to 25, held for life with all annual dividends reinvested in purchasing paid up additions. A very solid Mutual Company, like Mass Mutual is an excellent choice. I have done this since I was in the 18 to 28 age bracket and now at age 79 it has really built up, while still growing for my estate. It is annoying how “Totally Incorrect” Doug Casey and Skeezy purveyors of such hocus pocus double-talk keep on trying to sell their super-hyped “services” with slick pitches of this type. They may call it “The Babylonian Money Code” this month, June 2015; perhaps they’ll rename it the “Casey Money Code” in July?? Same sour well of “secret knowledge” made to look like the source of eternal living water and life-long wealth, all for $49/year on special offer!
Call it what they will, it isn’t worth $0.10 in my view.
I am wondering if these companies can be charged with defrauding prospective clients. No statues of limitations on fraud.
There really is no mystery. These plans have been around for 100 years. With the roaring 80s and 90s emphasis on stock and real estate investing, these plans lost some luster. the returns were solid but not on the same level as stock and real estate. But after the bubbles burst, these plans have made their way back into vogue. They produce a solid yield with guarantees and have enormous tax advantages because they are in fact, Life Insurance. If not crafted properly by someone who truly knows how these plans work, they can have less of an impact. One thing is for certain, they are not fraudulent but a legitimate alternative for retirement planning.
At last, voice of reason!
I just had 95.00 taken from this coumpany//The Psalm Beach Letter. I have been scamed, What can I do?
Taken from my checking account is what I mean.
I am sorry you had to pay for free information.
I recently created a webpage where I explain how exactly this account works. I also examined (“Scam or Reality” section) Palm Beach’s new teaser of the 702j account.
Everybody is welcoming to check it out:
http://www.7702account.com
Let me know if you have any questions.
I am sorry you had to pay for free information.
I recently created a webpage where I explain how exactly this account works. I also examined (“Scam or Reality” section) Palm Beach’s new teaser of the 702j account.
Everybody is welcoming to check it out:
http://www.7702account.com/scam-or-reality.html
Let me know if you have any questions.
go back to their page and find out how to cancel. They claim to refund you for the newsletter at any time during the first year.
Just making a point here – the whole life insurance policy and method is legitimate only from a mutually owned company. Even many agents don’t realize that fact, unfortunately. The marketing methods I’m reading about and watched, however, is what’s questionable. Don’t forget, the government HIGHLY regulates what Licensed people can say, advertise, and/or convey how this legitimate method works. So, yes, you sometimes see some extremely creative ways to get people interested. I’m not saying I agree with their marketing methods, but if it helps spread the word, hey, more power to them!
770 Plans are not for everyone. In fact, if you are 70 and above or in poor health, other investments like annuities, CDs or index Funds are probably a better option. Be mindful, 770 Plans are not a replacement for IRA, 401K or 403B but rather a means that enables you to fund well above the IRS set limits for those tax qualified plans. If you’ve maxed out your retirement plans or want to diversify your retirement plan, then 770 Plans are a good fit. 770 Plans are Life insurance policies plain and simple. And Life Insurance requires underwriting. Poor health issues will make these investments much less attractive. All that said, 770 Plans are an excellent investment because the return on investment is guaranteed and the cash returns can be accessed legally tax free down the road. If set up properly, a 770 plan offered by Mutual Life companies using traditional Whole Life plans that pay dividends (PUAs) back to policy holders are the best way to go. Both the dividend pool of money and traditional cash value pool of money created within these plans can be accessed tax free. But if over-funding the policy, paying into the plan a greater amount than the scheduled premium, is not an option, than the concept loses impact and becomes far less suitable to the investor. Despite what the doubters say, the plans work beautifully when crafted properly. Beware of scams and plans that are not offered through Mutual Life companies like Mass Mutual, Northwestern or NY Life. Beware of agents who just want to sell you Life Insurance. The Life Insurance portion of the contract is critical to determine the investment threshold. Without it, there are no tax breaks under the IRS codes. You cannot have tax breaks without the Life piece. That being said, the 770 investment over-funding is what makes these plans work. Without that, you might as well look into Term Life and invest the difference elsewhere.
Again, if interested , shoot me an email at goshengroup1@gmail.com. With 32 plus years of experience in this field, I can assure you i will not steer you wrong.
I am interested in The Babylonian Money Code etc reports
I’m not a big fan of creating trendy names for things. We’re talking about Dividend Paying Whole Life Insurance. Creating trendy names creates confusion and quite possibly suspicion that ultimately devalues the product. It could also be misconstrued as a sign of desperation. The reality is that there is a war against Dividend Paying Whole Life Insurance. It’s really good stuff that not only puts you in control of your money but also creates an atmosphere for real wealth generation. This conservative strategy is unmatched by any other conservative strategy, and it also matches and/or outperforms some of the more aggressive strategies over time.
I am an Authorized Practitioner of the Nelson Nash Institute. I had to complete a very thorough training program and have entered into a trust agreement with the Institute to properly educate people on how to utilize these policies. Also in the trust agreement, I agree to properly structure a policy to it’s maximum efficiency. Being an Authorized Practitioner of the Institute is a great way for me to say, Yes, I know how this stuff works and how can I help you understand it. If you want to learn more about Dividend Paying Whole Life Insurance, please visit our website http://www.infinitebanking.org.
HEY YOU! I have gone to the IBC Seminar myself, just not an official practitioner yet… Yes, it does work! Go Eric! If you’d like to visit my blog and leave some comments there as well, it’s: http://BuildPassiveIncomeandWealth.com.
Thank you Eric! I will definitely look into your site.
I can’t make heads or tails of this discussion. I paid for years on a whole life policy for my daughter. It was not expensive since she was in her teens and in perfect health when I bought it. It was from one of the top 5 mutual companies. Rather than receive the dividend or have it go toward purchasing additional insurance, the dividend was applied toward the premium each year. (The dividend almost always covered one of the quarterly payments with a few dollars left over.)
My daughter became legal owner of the policy when she reached 21. None of the “projections” for earnings were ever reached and what was supposed to be a “disappearing” premium never disappeared after over 25 years! I did borrow on it once but paid back the loan with interest. I wanted her and her husband to take over the payments but they declined, so I suggested that she cash in the policy since it was intended as an investment for her and I did not want to see the money go down the drain. She was told she would owe tax on a small portion of the cash value. Apparently the policy’s cash value was only a little more than the premiums I paid.
In my case, it appears that my investment failed miserably. I have no faith in these whole life policies, other than to insure that a child will have coverage and CAN later, at prescribed intervals and amounts, increase their coverage despite health or occupational issues.
Hello Petra,
Wish you had kept it or let the premium pay for itself..until she was much older.. or if you had paid the premium in early years you would have accumulated the cash value and the dividends. I am sorry for your loss.. that is why they say knowledge is powerful
I pay for a whole insurance only $8/month and the face value was $5k. have paid for about 40 yrs that is 96/yrx40=3840 and now including the dividend it is worth about 30k.and still growing.
nimi
Looks like they’re changing the number. they’re now calling them “702 accounts”
Saw this ad on Google:
Are “702 Accounts” Safe? – PalmBeachGroup.com
Adwww.palmbeachgroup.com/
Read the truth about “702” & “770” accounts before you move your money
Palm Beach Research Group has 168 followers on Google+
We all know there are “secret” savings and other bank accounts which are available to anyone who walks in and ask for the account by name. However, if you are without the name, you most likely will not get the account unless, that is, you are a depositor of large amounts and then the info freely flows thus helping to build a world inside America for the ELITISTS only. While we are happy for these people that lady luck always shined her happy smile upon them, many of us through no fault of our own and not because of bad decisions, did not have lady luck by our side and thus missed the funding for large deposits but should have the same benefits as everyone else has. IT is simple wrong to exclude some when these accounts were originally established by the lawmakers to be of benefit to all and then the bankers saw the accounts as ways of getting to the big depositors and attracting them. We are waiting for and it will happen, a good soul who had lady luck by their side and who has the large deposits and gained the information to publish it some where for all of us to find and then be able to use. Imagine an account that pays not 1.5% but 11% or 12% or more just because you knew the name of the account you were able to walk into the bank, ask to open by name one of these accounts and thus were granted the privilege designed for not just a few ELITE but for all Americans!
What are some of the names of these accounts that you can ask for at the bank that will give you larger returns, without buying life ins.?
Where are these accounts opened the 770 or 702 plan or account?
I have recently retired from the federal govt….I have a sizable 401K balance that I want to invest and generate 4% to 5%, to supplement my Gov retirement. I have met with a dozen financial planners in the San Diego area and have not found one yet that can meet my goal. My current plan is to slowly migrate the money in $50K annul increments into an existing ROTH IRA., which would eventually leave me with a tax free income stream that I will be able to leave to family members tax free. I realize I will be paying tax on the annual transfers, but the eventual payout of the ROTH, at a guaranteed 3.5% interest rate will eliminate all risk, and meet my goal of a supplemental tax free income stream and a tax free benefit to my survivors. What’s wrong with this plan.
You can not put $50,000 a year into a Roth Account!
Kevin:
If you find a solution, be sure and post it. Either that or email me. I’m a little older.
Thanks !
Kevin, there is nothing wrong with your plan – that is assuming you can transfer $50k a year into a ROTH IRA. Could you do better in a non-risk environment using the – so called – 770 account? Maybe. Here is what I propose: Send me some more basic information about your plans, your age and health, and I will run some scenarios using a “participant whole life insurance” the way banks use it, and I will be straightforward with you. What is the worst thing that can happen? That you will lose 3 minutes of your time sending me an email. I will be as clear and honest as possible, and let you know if you could maybe do better than your current plan; if so, I will even send you an illustration from a mutual life insurance company showing guarantees, results with the current (2015) dividend scale (which has been one of the lowest dividends in a very long time), the income you could receive per year, and the amount your family will receive upon your death. I would like a chance to prove this concept to you. If after receiving my email, you don’t think this is something you would like to do, you don’t have to reply, and you won’t receive any more emails from me. This is my email address: edgar@arceofinancial.com
Checking on the internet I find that this is an insurance policy in reality. I am well covered in this area. I t should be mentioned in your promotion. I am not interested. If I am signed up for a letter or something please cancel.
Thanking you in advance
Arthur Stevenson
After careful perusal, I have come to the conclusion that this thing is exactly like the investment in AT&T stock. This stock has a 5.5% rate of return if bought regularly over a period of time. It is extremely safe as it would take all the banks to fail before this company might fail.
Could someone explain how the “paid up additions” rider works? Mitchline007
Please send me a free special report as well of the “The Secret Investment Account”.
Life insurance with a cash value is a way of saving so long as you live to enjoy those savings. The problem with any type of cash value life insurance is that if you die, the company keeps the savings and pays out the policy value. If you have $100,000 in insurance and $20,000 in cash value, if you die, the company pays your beneficiary $100,000 and keeps the $20,000 in cash value. That is why term is a much better deal. I sold a term policy to a couple and took the difference from their $50,000 Universal Premium life policy and had them put some in Walmart stock. The couple both worked for Walmart, and the company matched $180 for $1800 invested. I also sold them two mutual funds for $25 a month each. When the husband died, the spouse got $100,000 and had more than $20,000 in the Walmart stock and mutual funds. Life insurance should be purchased for protection of the family in the event of the breadwinners death. Smart people try to save so that within the 20 or 30 years of a term policy, they will increase their savings to the value of the policy. A better investment would be a return of premium term policy, where if you live to the end of the policy term, the company returns all your premiums paid. There is an age limit in the 60’s where this isn’t available, however, there are reasonably priced term policies that you can buy when you get older. At 70, I purchased a $50,000 ten year policy from AAA Life that costs me $1009.50 a year. However, I will concede to those agents who sell whole life that if a person is unable to save for their future, then cash value policies aren’t such a bad idea.
$20,000 is the portion of the $100,000 death benefit that has vested before death. The insurance company doesn’t “keep” anything when paying a death claim. A world-class investor can often beat index investing; for the rest of us, DALBAR has shown that a whole life policy historically has matched or exceeded the return from investing in a index, but without the volatility and risk. Whole life is a core holding; surplus funds that you can afford to lose should be used for prudent investing.
H. Kinney, this argument has gone on for years. A.L. Williams made a fortune advocating just what amdiest1 is talking about. It seems to me that when you sell the whole life policy your insurance company is taking the money and “investing”, just as you would do as an individual. THAT is the term life argument in my humble opinion. It makes perfect sense to me. Of course, most whole life advocates sell on the presumption that people do not have the discipline to invest. Maybe they are right. It seems to me that neither is wrong.
I beg to disagree with you Harold, but if you buy a 20 year term policy and end up saving $20,000 in a bank or credit union, and you die in the fifteenth year then your beneficiaries get the $100,000 and still have $20,000 in the bank or credit union. By my math, that is $120,000 of spendable cash. On the other hand if you buy a $100,000 whole life, universal life or variable life policy and have $20,000 in cash value and die in the fifteenth year of the policy, your beneficiaries will have $100,000 of spendable cash. A fifth grade math student knows the difference between $120,000 and $100,000.
Term insurance is temporary insurance; whole life is permanent. In your example, the beneficiaries have about a 96% chance of receiving only $20,000, because only 4% of term policies are still in effect when the insured person dies. Trying to achieve the $120,000 figure is a gamble with very bad odds. That does not sound like a financial plan to me.
ahh.. but what if you don’t die before your term policy expires? What then, oh wise one? Let’s see if a fourth grade student can figure that one out.
With a properly structured life insurance, the death benefit portion will grow every year. So in your example, if you already accumulated $20,000 in cash value, then the death benefit will grow by more than $20,000, so at the end of the day, you will receive more than $120,000 – tax-free.
hi folks , i’m in the 95.00 dollar camp . how ever , i got a credit from “psalm beach ” and for a laugh , the gal i spoke with acted suprised when i asked for the refund as though i was the only person who had asked for a refund . HO HO HO !!
Nice Blog! I just joined and hope to keep up!
I have a dear friend who cannot manage money. She trusts every scam artist and has lost millions of inherited money. She’s down to her last million, half of that liquid, at age 52. She has IRS problems and legal problems from some of the complicated financial transactions that she invested in and didn’t understand. I am strongly urging her to buy a whole life dividend policy for reasons that haven’t been discussed here. The IRS can’t touch a life insurance policy, and it also almost always has immunity in bankruptcy or legal settlements. No one can put a lien on it. It’s simple enough for her to understand, and if she chooses a reputable company she can’t have the money scammed or stolen from her. It’s a way of protecting her from herself so that she has a secure old age. She’s still working now and she doesn’t need this money immediately. She’s a naturalized citizen and has a very short social security record. She owns her own home and she has two small rentals on that same property. My hope is that if she pays off her home loan and puts some money into the whole life policy and some into stable dividend stocks in an IRA (which she has never had before) that she’ll have a secure old age despite herself.
The Internal Revenue Service can indeed “touch” a life insurance policy under certain circumstances, as a general rule. The cash surrender value of a whole life insurance policy is “property” of the taxpayer for purposes of the Internal Revenue Code. If a Federal tax lien has come into effect, the tax lien will indeed cover the cash surrender value. Indeed, the lien will generally apply to the cash surrender value even if the policy was purchased after the lien came into effect. Further, an IRS levy on (i.e., actual seizure of) the cash surrender value is covered under Internal Revenue Code section 6332(b). You are correct, however, that various federal and state statutes can make certain aspects of life insurance “exempt” from the definition of “property of the estate” in bankruptcy. That exemption does not necessarily affect the legal power of the IRS to go against the cash surrender value, though, once the automatic stay in the bankruptcy is lifted.
WTF?????
You are misguiding her in a large way. Number one….you are not a professional and are providing legal and investment advice. You will be sued to high heaven with your advice. Number 2…. The state precedents determine what type of investments are protected from creditors and predators. In my home state Life CV%DB, annuity, pensions, IRA and primary residents are protected.
Number 3… The IRS is neither a creditor or a predator and any movement of money with a known liability will be looked at as possible intent to defraud. The surrender charge alone will force a loss of principal. The only way to deal with the IRS is directly with an attorney and not the IRS advertisers on the radio…………or flee the country after liquidating assets before leins are filed.
Dear mongoose:
You don’t know what you are talking about. First, am both an attorney and a certified public accountant. No, state precedents do NOT determine what type of investments are protected from Federal tax liens — and the word is “lien”, not “lein.” In your home state, a “levy on an organization with respect to a life insurance or endowment contract issued by such organization [life insurance company] shall, without necessity for the surrender of the contract document, constitute a demand by the Secretary [of the Treasury or his delegate, i.e., the IRS] for payment of the amount described in paragraph (2) and the exercise of the right of the person against whom the tax is assessed to the advance of such amount.” –from Internal Revenue Code section 6332(b). Yes, the IRS is a CREDITOR when it comes to Federal taxes. The only part you were correct on is that yes, the BEST way to deal with the IRS is with an attorney, and not with advertisers on the radio. No, I am not misguiding her. I know whereof I speak, and you most certainly do not.
I find it amusing that “mongoose” impliedly claimed to understand something as mind-numbingly complex as the scope of the U.S. Federal tax lien and the power of the IRS to levy on the cash value of a whole life insurance policy — and yet was obviously unaware that state law exemption statutes and state law precedents do not restrict the legal power of the IRS to levy on a cash value, which is instead governed by section 6332. Life insurance companies are certainly well aware of section 6332. See, e.g., United States v. Prudential Ins. Co. of America, 461 F.2d 208 (5th Cir. 1972). I hope mongoose is not in the business of selling insurance. If he/she is, then some continuing education is in order.
Oh, another thing, mongoose: You are actually correct when you say that a movement of money (in an attempt to defeat the IRS or another creditor) could be viewed as evidence of intent to defraud, and that the surrender charge alone would force a loss of principal of the cash value. However, YOU are the one who brought up those issues, not me. I have been representing taxpayers (and advising other attorneys) in dealings with the Internal Revenue Service — particularly with respect to bankruptcy — for over 25 years. I’ve been licensed as an attorney for 27 years, and I’ve been licensed as a CPA for 37 years. I’ve also been designated as an expert on taxation in U.S. bankruptcy court. So, when it comes to U.S. federal tax, yes, I am a professional.
You misunderstood me. Creditor and predator laws vary by state.
IRS trumps all. It cannot be “set aside” for protection. http://www.assetprotectionsociety.org/wp-content/uploads/2013/07/50-State-Creditor-Exempt-Asset-Chart-2013.pdf
Inherited IRA’s are where the battle ground is now.
There are ways to protect assets with certain vehicles but none work for the IRS.
What I said was completely correct in regards to creditor and predator laws.
I also love grammar Nazis
You misunderstood me. Creditor and predator laws vary by state. I also wasnt commenting on your post but the one with the friend…….not you.
IRS trumps all. It cannot be “set aside” for protection. http://www.assetprotectionsociety.org/wp-content/uploads/2013/07/50-State-Creditor-Exempt-Asset-Chart-2013.pdf
Inherited IRA’s are were the latest battleground on this
There are ways to protect assets with certain vehicles but none work for the IRS.
What I said was completely correct in regards to creditor and predator laws.
I also love grammar Nazis.
Dear Mongoose: I can’t seem to find a “reply” button for your May 31 post, but I’ll try this (so, I’m not sure where this will show up in this sub-thread). First of all, your May 31 responsive post is right under my post, at least on my computer screen. Neither Diva’s “friend” — nor anyone else except you and me — has posted anything in this sub-thread. So, I don’t know what post you were responding to, other than mine. Second, I haven’t commented on your grammar. I commented on your erroneous spelling of the word “lien.” Granted, everyone makes typographical mistakes.
Thank you, Larry you are so very correct! Let’s remember we are dealing with government. Yes, the IRS can take the cash value of the life insurance, we had that happen to my husband in Louisiana. AND they can pretty much do as they please. If we go digital completely, I hate to see what is really going to happen to all of us! Thanks for your professional insights!