My Journey Back to NYC

New York City
I’m back in NYC again this week for a quarterly American Tax Planning Institute (ATPI) conference. The ATPI is a small group of financial planners sharing planning ideas, and hearing from the best speakers in each industry.
I love being in the city during the Holidays. People are cheery–there is a whole different mood–and of course the decorations and music, make NYC a great place for holiday shopping.
Here’s a holiday gift for you. I want to share with you an idea I learned on Wednesday. If you have term insurance that you plan to drop, do not drop it!!! Instead we can exchange or “1035” your term policy to another account so you can recover all the money you paid to that insurance company. What? You can recover all those payments we’ve made over the past 20 years? Yes! But how can you exchange a term policy that has no cash value to anything? Believe it or not, you can. All we need is to have a dollar of unused premium. For example, let’s say you have made your annual payment for this year. You will use up that payment as a certain amount or your premium is applied each day until, at the end of your year, you have no value left and it’s time to make a new payment.
So as long as you have one dollar of unused premium, we can 1035 that money out to a new account. Now you have several options. One option is that you cancel the new account and use all that money that you’re paid to write off as an ordinary income loss.  Another option is, if you 1035 your unused premium to an annuity, as you take lifetime income from your annuity, you can cut your taxes dramatically. Here’s why. Your cost basis in your annuity is increased by all the premiums you paid for your term life. That means there is less taxable gain, or taxable money in your annuity then there was before. Whatever you do, there is a tax benefit by 1035-ing your term policy to a new account. So before you give that policy up to cut your expenses, let’s talk.
I’ll share some more ideas with you soon. Please know there are tons of great ideas out there. We all tend to look at the “red lights” in the tax code. Those are the parts of the tax code that say “stop and pay tax.” Very few people, financial advisors and CPA’s focus on the “Green Lights” the tax code that says you can go through the light without paying taxes. I am very fortunate to be a part of groups like the American Tax Planning Institute and the Forum 400 where we work hard to find the Green lights.
Happy Christmas shopping!