insurance can trim your tax bills
The world’s most powerful companies use sophisticated strategies to eliminate taxes. If you are a corporate executive, you might be able to take advantage of variations on these strategies — one of them being life and death.
Big money is involved. A recent report from the Center for Effective Government and Institute for Policy Studies shows that of America’s 30 largest corporations, seven paid their chief executive officers more than they paid in federal income taxes in 2013. All of these firms were highly profitable, collectively reporting more than $74 billion in U.S. pre-tax profits — and a combined $1.9 billion in refunds from the Internal Revenue Service.
Insurance is another way to reward top execs without drawing so much from corporate coffers, and also save on taxes. With the insurance stratagem, the policies come with the minimum death benefit you can buy with the maximum amount of cash allowed under IRS guidelines. Section 7702(e) of the tax code provides guidance as to how you borrow earnings out of a life insurance contract using zero-cost loans, which are not taxable events.
Large companies began using entity-owned life insurance — banks (BOLI), corporations (COLI), trusts(TOLI) and capital split dollar policyholders – more than 30 years ago, when E.F. Hutton developed the first versions of what later came to be known as a universal life insurance contract.
Human resources consultancy Aon Hewitt estimates that new COLI (corporate owned life insurance) policies worth at least $1 billion are put in place every year. Most recently, companies used these vehicles primarily to fund employee benefits such as health care, deferred compensation and pensions.
Via-usatoday
