WHAT YOU NEED TO KNOW!

PARTIES:

Typically, these transactions will include an Insurance company, accountant, tax attorney, and a promoter (someone with an insurance background, perhaps an actuary, who knows how to structure the policy itself). These groups will use insurance brokerages and sub-agents (licensed in the various states) to sell the policies themselves. In this instance, I believe that some brokerage houses also sold the product.

INSURANCE COMPANIES

AMERICAN GENERAL LIFE INSURANCE COMPANY®

INDIANAPOLIS LIFE INSURANCE COMPANY®

HARTFORD LIFE AND ANNUITY INSURANCE COMPANY®

PACIFIC LIFE INSURANCE COMPANY®

OTHERS ! !  BANKERS LIFE®?

Some of the insurance companies above have already been sued in HUNDREDS of cases.

PROMOTERS, ATTORNEYS, ACCOUNTANTS

KENNETH HARTSTEIN

ECONOMIC CONCEPTS, INC.

PENSION SERVICES, LLC

HOW THESE PLANS WORK:

In the late 1990’s, the individuals and groups above devised a scheme to sell abusive tax shelters under the auspices of Section 412(i) of the tax code. A 412(i) is a defined benefit pension plan. It provides specific retirement benefits to participants once they reach retirement and must contain assets sufficient to pay those benefits. A 412(i) plan differs from other defined benefit pension plans in that it must be funded exclusively by the purchase of individual life insurance products. To create a 412(i) plan, there must be a trust to hold the assets. The employer funds the plan by making cash contributions to the trust, and the Code allows the employer to take a tax deduction in the amount of the contributions, i.e. the entire amount.

The trust uses the contributed funds to purchase some combination of life insurance products (insurance or annuities) for the plan. As the plan participants retire, the trust will usually sell the policies for their present cash value and purchase annuities with the proceeds. The revenue stream from the annuities pays the specified retirement benefit to plan participants.

These defendants (with the aid and knowledge of the insurance companies) used the traditional structure and sold life insurance policies with excessively high premiums. The trust then uses the large cash contributions to pay high insurance premiums and the employer takes a deduction for the sum of those large contributions. As you might expect, these policies were designed with excessively high fees or “loads” which provided exorbitant commissions to the insurance companies and the agents who sold the products.

The policies that were sold were termed Springing Cash Value Policies. They had no cash value for the first 5-7 years, after which they had significant cash value. Under this scheme, after 5-7 years, and just before the cash value sprung, the participant purchases the policy from the trust for the policy’s surrender value. In theory, you have a tax free transaction.

The IRS does not recognize the tax benefit of such a plan and has repeatedly issued announcements indicating that such plans are contrary to federal tax laws and regulations.

These plans were targeted to high net worth individuals, including doctors, dentists, corporate executives, and professional athletes.

WARNINGS:  

Do NOT ignore IRS LETTERS regarding Penalties!!  This could be your first clue as to the fraud.  Ignoring these letters can cost you hundreds of thousands of dollars!

DO NOT sign ANY DOCUMENT that has a RELEASE against the insurance company or others!!!

If your Promoter/Agent tells you NOT to file tax forms - be CAUTIOUS and CONTACT your tax professional and then CONTACT US!

 To send large files (such as copies of your insurance policy, premium  payments, bank statements, etc.) please use lawyerford@gmail.com.  Please note that your inquiry does not create and attorney/client relationship. After reviewing your potential claim an attorney-client relationship will be discussed and reduced to writing.  Your case is governed by a statute of limitations, or "time bar" in which your case must be filed in a court of law or you will lose your right to sue.  Every state has a different statute.   

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