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Home » Roth IRA Conversions to Cash Value Life Insurance May Elicit Litigation

Roth IRA Conversions to Cash Value Life Insurance May Elicit Litigation

Posted December 29, 2020 by Jason Cross Leave a Comment

My last post, “Roth IRA Conversions May Trigger a Lawsuit”, addresses the unnecessary tax consequences of Roth IRA conversions. In this blog, addressing the conversion to life insurance is a big wake up call to those insurance agents and advisers that use it. Some investment advisers take a holistic approach to retirement, including the tax consequences now and in retirement. Few of those advisers use cash value life insurance, they generally use mutual funds and/or ETFs. They seem to have a prejudice towards insurance, whether life insurance or annuities.

But many insurance agents who are not licensed for securities use cash value life insurance as their go to option in a Roth conversion. This is an automatic red flag for security attorneys examining mutual fund and ETF conversions to cash value life insurance, the conflict of interest is inherent with a limited life and health license. Keep in mind that having the client surrender a security may be viewed as a security trade by broker/dealers and their attorneys expose your practice to liability.

If all you sell cash value life insurance as the only option in a Roth IRA conversion strategy, you become a prime target for intelligent competitors as well as security attorneys.

Filed Under: E & O Insurance, Insurance Agent Ethics

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