I.R.S Loophole

In recent months some of the wealthiest older Americans have been buying huge life insurance policies on themselves. The article describes once again how the rich get richer and poor get poorer. The wealthiest senior citizens have found yet another way to hold state and federal revenues hostage- and not have to pay their due in taxes.

These “privileged” seniors have not shopped for the cheapest rates but for the highest rates they can find. It is reported that in some cases, they are happy to pay 10 times the lowest rates for the insurance. One might ask- why would anyone be willing to pay so much? The answer is simple- Taxes.

Through a loophole or a technique invented by a New York lawyer and a chemical engineer, each dollar ($1) spent on this insurance can typically eliminate $9 in taxes. Spend $10 million on this insurance, and avoid $90 million or more in income, gift,

generation- skipping and estate taxes.

The country continues to struggle during difficult economic times. The rich and powerful continue to cheat and deceive. My great grandmother from Baltimore paid $3.17 every week to an Insurance “agent” who came to collect. I can still remember that old, frayed book she used to have ready for him each week. She was 92 years old when she passed away. She had paid that life insurance for 30 years. There was not enough to give her a decent funeral. The family had to step in and pay for the services.

Insurance agents are the next in line to benefit from this “technique.” Agents selling these huge policies are earning millions of dollars for selling just one of these policies. One small firm owner admitted that his firm’s commissions this year have already reached $20 million.

This loophole sidesteps the gift tax in a two- step process. First, the person buying the policy

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