The Consolidated Appropriations Act, 2021, which combines stimulus relief for the COVID-19 pandemic and appropriations for the federal fiscal year ending September 30, 2021, was signed into law on December 27, 2020 by President Trump. The Appropriations Act amended section 7702 of the tax code, which defines the term ‘life insurance contract’ for federal income tax purposes.
You are probably well aware that current historically high exemptions, depressed asset values, and historically low applicable federal rates (AFRs) and 7520 rates have created the perfect storm for wealth transfer planning. What you may not know, however, is how powerful loan regime split dollar (Reg. sec. 1.7872-15) can be in this type of environment. In fact, loan regime split dollar rules are even more favorable than the intra-family loan rules (Code sec. 7872).
The New York State Department of Financial Services (NYDFS) best-interest Regulation 187 (NY 187) is effective February 1, 2020 for life insurance transactions, and August 1, 2019 for annuity transactions within the state of New York.
Why a FLP Strategy in 2020 Could Benefit Your High-Net-Worth Clients Harry met Wilma and started a family. Now, they’re looking for a valuable wealth preservation or asset protection instrument for their $100 million estate. Family Limited Partnerships (FLPs) have been and continue to be one of the most powerful tools in an estate planner’s toolbox due to the ability to significantly discount the value of gifts made from parents to the next generation(s). Utilizing the doubled lifetime exemption afforded by the Tax Cuts and Jobs Act ($11.4 million/single, $22.8 million/married), a parent may be able to use a FLP strategy to gift heirs more assets from their estate than what they’d otherwise be able to directly gift, while also maintaining some control over those same assets.
When positioning life insurance from a perspective of potential cash value build-up, there are various product types to consider, each with its own straightforward, distinguishing features. For aggressive risk profiles, variable life products—which may be fully exposed to the ups and downs of the market—may be appropriate. On the other end of the spectrum, fixed universal or whole life contracts with guarantees may be more suitable for a risk-averse client.
As the U.S. economy continues to improve, so too has the job market, creating greater competition for talent. Today there are 0.9 unemployed persons per job opening1, contrast that with 1.9 prior to the latest recession and 6.6 per job opening in July of 2009. The labor market is tight. As such, businesses are confronting increasing challenges to attract, reward and/or retain key personnel. If a business were to lose a key employee to death, disability, or the competition there is just not readily available talent waiting to walk through the door tomorrow. By undertaking thoughtful planning today, business owners can implement value added benefit programs to reward and retain existing key executives and, when necessary, successfully compete for new talent.