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.