RETURN TO FOREVER - What Game Shall We Play Today

I have mentioned in past blogs my love for music including the fact that I was a mediocre musician myself. As a horn player (trombone and baritone) I gravitated to horn bands and what is today known as smooth jazz. In my jazz pilgrimage I was a fan of The Crusaders, Grover Washington, Jr. and Chick Corea. Sadly, Chick Corea died recently.


One of his great groups in the jazz fusion genre was called Return to Forever which featured Chick Corea on keyboards, Stanley Clarke on Bass, Airto Moreira on drums and his wife Flora Purim provided the vocals. Airto and Flora are Brazilians. Flora Purim had a six-octave vocal range and was Downbeat Magazine's jazz singer of the year four times and was nominated for two Grammy awards. I don't think that there is an animal in the Amazon jungle that Flora couldn't imitate. I had the privilege of seeing her perform in college. One of their great recordings is a song called “What Game Shall We Play Today”.


The Biden Administration and a number of states are poised to increase taxes significantly. The title of the song reflects the ongoing "Mano a Mano” Death Match between taxpayers and the government. The estate and gift tax will be back with a "bite" that not only breaks the skin but sinks a family's efforts to accumulate and transfer wealth across multiple generations. Split Dollar life insurance using the leveraged rollout technique is well positioned to provide exceptional tax advantages and tax advantaged wealth accumulation. While my roots were cast in the retail life insurance industry while attending law school, I have been a private placement life insurance (PPLI) specialist for the last twenty years. From afar it looks like the retail life insurance industry has largely forgotten the power and glory of advanced marketing strategies such as split dollar life insurance focusing more on premium finance strategies. There is nothing wrong with that except life insurance producers threw out gold and silver with the bath water.


Employer Sponsored Split Dollar is an excellent planning technique used to provide business owners and key executives with permanent life insurance. The company as the sponsor pays for all or most of the policy premiums. The employee is taxed according to the method of Split Dollar chosen. Under the Economic Benefit Method, the employee is taxed based upon the value of the economic benefit based upon the lesser of the insurer's one year term cost or the Table I cost. The tax cost to the executive for income and gift tax purposes for a trust-owned policy is minimal. Policy assets grow tax-free within the policy. The structure of the Split Dollar Arrangement allows the employee to redeem the employer's interest at a 75-85 percent discount. The executive may then use the policy to enjoy a tax-free retirement income.


Summary


Taxpayers will need all of the tools available in their arsenal to win the Game. Split Dollar life insurance using the Leveraged Rollout technique is the best path forward. Stay tuned for more insight and how to win the Game moving forward.