412(i) funding

[Guest warocker1]

I am looking for a good article that addresses the inappropriateness of using universal life contracts to fund 412(i) plans. I am trying to convince a 31 year old that he and his wife cannot deduct the $250,000 that his insurance agent and his accountant are telling him that he can. Any help would be appreciated.

[mwyatt]

Not an article, but you might want to consider what the "end game" is with that type of deduction. PVAB of $1333.33 payable at 62 for a 31 year old (1/10th of $160,000 /12) valued using Blended 83GAM with a 5% interest rate (no pre-retirement mort) is only around $44,000. Say his wife is identical in age, salary, then you're still only talking max LS in range of $88,000, yet you just dumped in $250,000 for the first year. Looks to me that you get a huge "deduction" that would get taken all back in excise taxes at the end. Never could figure the end of these plans out as it seems that all you are doing is creating a massively over funded plan (unless your client is the only one who wants to stick with an annuity payment at the end rather than getting a lump sum rollover to an IRA).