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Steve Daiker in Ladue News

Steve Daiker in Ladue News

February 1, 2013

Authored by: Stephanie Moll

St. Louis Partner Steve Daiker was quoted at length Jan. 25 by the Ladue News concerning when, why and how to modify life insurance policies in order to protect yourself and your family. Life insurance should be obtained at a young, healthy age to qualify for a lower premium, then policy holders should be mindful of when to update policies, Daiker said. Marriage, the birth of a child, divorce, retirement, even changes in the growth of a business all are events that may warrant a change in life insurance, he said.

Recognition of Income on Roll Out of Split-Dollar Arrangement

The Tax Court in Neff v. Commissioner, TC Memo 2012-244 (8/27/2012) recently ruled on the income tax consequences of the termination of a split dollar life insurance arrangement (“SDLIA”), in ruling that the payment of a discounted amount by the employees on the termination of the SDLIA resulted in the recognition of income to the employees to the extent of the difference between the amount owed to the corporation under the SDLIA and the amount the employees paid. The Tax Court did not address the issue of the extent the equity portion of a SDLIA may be subject to income taxation on the termination of the SDLIA as that issue was not raised by the Service nor addressed by the Tax Court.

This case involves a pre-final regulation SDLIA to which the final regulations do not apply. Rather Rev. Ruls. 64-328 and 66-110 and Notice 2002-8 apply to determine the

Fiscal Cliff Talks Begins

Fiscal Cliff Talks Begins

November 16, 2012

Authored by: Matthew C. Jessee

On Friday, President Obama and Vice President Biden convened Majority Leader Reid, Minority Leader McConnell, Speaker Boehner and Minority Leader Pelosi for an initial discussion on how to avoid the combination of tax hikes and spending cuts that make up the “fiscal cliff.” While President Obama has stated his goal is $1.6 trillion in higher revenue, there is no agreement on how much deficit reduction the negotiators want to achieve and how much of that should come from taxes. In the event an agreement is not reached, the parties are already discussing fallback plans for $60 billion to $100 billion in deficit reduction to replace automatic spending cuts set to take effect in January.

For more information on the Fiscal Cliff, see our prior post.

 

Gifting Real Estate: A Comparison of QPRTs and Intentional Grantor Residential Trusts

As discussed in our prior post, “2012 Gift Tax Opportunities: Wait to Gift, but Do Not Wait to Plan“,  we discussed how the 2010 Tax Relief Act has provided a great opportunity for lifetime gifts to family members with a temporary increased estate and gift tax exemption of $5.12 million making these gifts potentially free of ever incurring gift or estate tax. The exemption will return to $1 million on January 1, 2013 unless Congress acts, and although most commentators think a return to $1 million is unlikely, there is a good possibility the exemption will be reduced.  However, many people are reluctant to make gifts of their liquid assets, in case they might have need of them as the get older.  Many people, therefore, are looking for ways of making a gift on a non-liquid asset, such as their home or another piece of real estate, such as

Mission: Possible — Saving Estate Taxes on Life Insurance

Since Tom is back in the news this week, and because I finally watched Ghost Protocol this weekend, I thought I’d re-post this November 2011 blog on Tom Cruise’s possible use of life insurance in his estate planning.  Keep in mind, based on any divorce settlement agreement he reaches with Katie Holmes, Tom’s need to maintain life insurance may change.

When I first saw this video of Tom Cruise performing his own stunts on the outside the Burj Khalifa in Dubai (the tallest building in the world), a mile and a half above the earth, for the movie Mission: Impossible — Ghost Protocol (aka Mission: Impossible IV),  my first thought was, “Wow, how much life insurance do you think he has?”  My next thought was “Think of the estate taxes his estate will have to pay on those life insurance proceeds if the life insurance isn’t held in a proper

A Case of Buyer’s Remorse or Breach of Fiduciary Duty?

In French v. Wachovia Bank, N.A., 2011 WL 2649985 (E.D. Wis., July 6, 2011), the court issued an order granting Wachovia Bank’s (“Wachovia”) motion for summary judgment in an action by the beneficiaries of the French Trusts for breach of fiduciary duty. Wachovia was the successor trustee of the French Trusts that owned two whole life policies as well as significant other assets having a total value of about $30 million. Wachovia was appointed as such successor trustee in conjunction with its review of the policies and its recommendation to replace the whole life policies with a no-lapse John Hancock policy. The settlor (“French”) had his attorneys review the recommendation and provide him an analysis of the proposed exchange.

After an extensive year-long analysis of the advantages and disadvantages of the proposed policy exchange, including multiple detailed memoranda from his attorneys and discussions of the transaction with his attorneys and

Investor Had No Insurable Interest in STOLI

Nyet, we don’t mean the vodka. In the life insurance world, STOLI stands for “stranger owned life insurance.”

In Pruco Life Ins. Co. v. Brasner, Case No. 10-80804,U.S. Dist. Ct S.D. Florida, November 14, 2011, the court once again found that an investor or stranger who owned a life insurance policy lacked an insurable interest. In this case, Arlene Berger was interested in obtaining the lucrative cash payment that was the pot at the end of the rainbow of this life insurance arrangement, but with a net worth of under $1 Million, she really had no need for the life insurance. Ms. Berger learned of the life insurance arrangement from a free seminar she and her husband had attended, and she was referred to Mr. Brasner, who was a life insurance agent for Pruco.

Ms. Berger, through the help of Mr. Brasner, applied for the life insurance, but had no

Improperly Cancelled Life Insurance Policy Leads to Taxable Income

In Estate of Feder, Yulia Feder learned the hard way that failure to properly cancel a life insurance policy can lead to income tax consequences.

In a recent Tax Court decision, Estate of Feder, T.C. No. 1628-10, T.C. Memo. 2012-10, January 10, 2012, the Tax Court had no trouble ruling that the taxpayer, Yulia Feder, received taxable income on the lapse of her old Northwestern Mutual life insurance policy even though she did not receive any cash from the policy at that time.

In this case, Feder had paid $73 per quarter in premiums on her $50,000 life insurance policy until November of 1987. In January of 1988, Feder purportedly wrote a letter to Northwestern Mutual requesting that her policy be cancelled, and providing a new address to which all future correspondence should be sent. Feder testified that she had not received any further correspondence from Northwestern Mutual after making that request and thought

The Elusive Insurable Interest Requirement

Life insurance is an important estate planning tool that many people buy to provide financial support for loved ones and to ensure that their estate will be able to pay estate taxes when they pass away.

The “Insurable Interest Requirement”. In the U.S., a life insurance policy can only be acquired by a person (or entity) who has an “insurable interest” in the life of the insured. This means the person who acquires the policy must have some reason to wish for the insured’s continued life. This requirement for an insurable interest originated in England in the 18th century when Parliament enacted a law requiring an insurable interest to stop the popular practice of wealth investors purchasing life insurance policies on elderly persons and persons accused of capital crimes so they could reap the profits when the person died (by natural or unnatural causes). This law remains in effect in

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