Commissions after Death

[goillini52]

If the plans are med supp and life, no license should be required for vested commissions. MA may be a different story. Best place to start is by contacting the carriers.

Yep, if no spouse, but beneficary, they need to contact the company and fill out the EFT info for deposits. If joint account nothing needs to be done. Med Supps and FE require no CE, licenses or certifications so you don't have to do anything to keep the renewals coming in.

 

[MichFlor]

First I would set up a corporation and have commissions paid to that s corp.

This is a great reason to have commissions paid to an S-Corp. There are lots of other good reasons, like saving on FICA and setting up Solo 401(k), etc.

 

[DonP]

Rouses note from 2019 is correct . I was licensed in the 1980’s and wrote a lot of life and health business . I let my license lapse . I was getting ok renewals for 10 yrs . 30 yrs later I still get a renewal from 1 company . It’s just like if a company terms you for no production . 5 years from now they have no idea if your licensed . Bill on here did a podcast on mapd . That’s a different animal . You have the transfer your block .With some CO’s that’s tough . If nobody’s servicing your mapd it’s going to peel off fast anyway . I have many CO’s I did 1 or 2 policy’s with 8-10 years ago I get $20 here and there from .I’d at the very least have a joint account as you get older with your wife or kid so if you pass and your license lapses it will still go into a JT account .

 

[rousemark]

Rouses note from 2019 is correct . I was licensed in the 1980’s and wrote a lot of life and health business . I let my license lapse . I was getting ok renewals for 10 yrs . 30 yrs later I still get a renewal from 1 company . It’s just like if a company terms you for no production . 5 years from now they have no idea if your licensed . Bill on here did a podcast on mapd . That’s a different animal . You have the transfer your block .With some CO’s that’s tough . If nobody’s servicing your mapd it’s going to peel off fast anyway . I have many CO’s I did 1 or 2 policy’s with 8-10 years ago I get $20 here and there from .I’d at the very least have a joint account as you get older with your wife or kid so if you pass and your license lapses it will still go into a JT account .

My note? 2019? I can't remember what I said yesterday!

 

[somarco]

My note? 2019? I can't remember what I said yesterday!

You said nothing of consequence yesterday

 

[WiscBroker]

First I would set up a corporation and have commissions paid to that s corp.

Next, have your wife as an officer of corporation and get her health license asap. No need for carrier appts or e&o for her, just do CE testing to keep license active.

AARP UHC med supps have a "surrogate agent program" for when agents pass away. Commissions will be passed on to surviving spouse within 90 days if licensed. They now pay for life of policy, like $40 year after year 11. 500 policies equals 2k a month.

It's mostly based on carriers, and type of biz and state laws. She would have to rewrite ACA biz probably and get appointed. I also hope my son takes over biz down the road.

This is one of the better answers I have seen to this question. Let's face it, there should be a clear cut plan for us agents to have to prepare for a transition to a family member and it seems like none of really have a definitive idea as to what to do but this answer does start the conversation.

I have been trying to figure this out for a while. I'm a lone wolf, single member sole prop with an LLC listed as sole prop-disregarded entity. Now, the IRS recommends all commissions, payments, etc in this scenario should be paid to the social security number of the single member, not the EIN of the LLC. However, when I talk with commissions reps at insurance companies and/or FMOs/MGAs they tell me a lot of brokers have the commissions assigned to the LLC's / EIN. Now I am not sure if they understand I am talking about single-member LLCs disregarded entities or if they are just talking generally. However, I would lean toward following the IRS's recommendation which I have and almost all of my commissions are paid to me and my SSN but deposited in my business bank account which is under my LLC/EIN. When I get my 1099s all but a couple come in under my personal name and SSN and not my LLC/EIN.
HOWEVER, I have been thinking... I think it would be more logical if all my commissions were paid to my LLC/EIN because at any given point I could appoint a "manager" (for LLC purposes) to run the LLC and therefore that account would remain active after death whereas most bank accounts are frozen after death until probate is completed (unless there is a POD but then the account is closed anyway or unless there is a joint account holder which I am not sure is possible on a business account if it is a disregarded sole prop business unless maybe you can appoint a manager such as your spouse).
My goal would be to have all the commissions paid to the business instead of me so that if I pass or become incapacitated due to illness the business could continue receiving commissions until a new licensed agent takes over (i.e. spouse, selling the book to another agency, etc). The idea is to BUY TIME. I would think having the commissions paid to the business entity would give more time to allow for a transition to a new licensed agent, ie. spouse compared to if it were paid directly to me and suddenly I die. I would also wonder if this would make selling the book of business easier since it would simply mean selling the business. Am I way off on this one??? I think I might be but not sure. Thoughts?

 

[Tahoe Ray]

This is one of the better answers I have seen to this question. Let's face it, there should be a clear cut plan for us agents to have to prepare for a transition to a family member and it seems like none of really have a definitive idea as to what to do but this answer does start the conversation.

I have been trying to figure this out for a while. I'm a lone wolf, single member sole prop with an LLC listed as sole prop-disregarded entity. Now, the IRS recommends all commissions, payments, etc in this scenario should be paid to the social security number of the single member, not the EIN of the LLC. However, when I talk with commissions reps at insurance companies and/or FMOs/MGAs they tell me a lot of brokers have the commissions assigned to the LLC's / EIN. Now I am not sure if they understand I am talking about single-member LLCs disregarded entities or if they are just talking generally. However, I would lean toward following the IRS's recommendation which I have and almost all of my commissions are paid to me and my SSN but deposited in my business bank account which is under my LLC/EIN. When I get my 1099s all but a couple come in under my personal name and SSN and not my LLC/EIN.
HOWEVER, I have been thinking... I think it would be more logical if all my commissions were paid to my LLC/EIN because at any given point I could appoint a "manager" (for LLC purposes) to run the LLC and therefore that account would remain active after death whereas most bank accounts are frozen after death until probate is completed (unless there is a POD but then the account is closed anyway or unless there is a joint account holder which I am not sure is possible on a business account if it is a disregarded sole prop business unless maybe you can appoint a manager such as your spouse).
My goal would be to have all the commissions paid to the business instead of me so that if I pass or become incapacitated due to illness the business could continue receiving commissions until a new licensed agent takes over (i.e. spouse, selling the book to another agency, etc). The idea is to BUY TIME. I would think having the commissions paid to the business entity would give more time to allow for a transition to a new licensed agent, ie. spouse compared to if it were paid directly to me and suddenly I die. I would also wonder if this would make selling the book of business easier since it would simply mean selling the business. Am I way off on this one??? I think I might be but not sure. Thoughts?

It will 100% make it easier to sell your business or pass it down if you assign all comp to your LLC.

It's also way easier on your accountant.

The main issue with this is licensing fees. You'll have double license in every state. Not an issue if you're only working one or two states, but it can add up if you have a lot more than that.

 

[Newby]

This is one of the better answers I have seen to this question. Let's face it, there should be a clear cut plan for us agents to have to prepare for a transition to a family member and it seems like none of really have a definitive idea as to what to do but this answer does start the conversation.

I have been trying to figure this out for a while. I'm a lone wolf, single member sole prop with an LLC listed as sole prop-disregarded entity. Now, the IRS recommends all commissions, payments, etc in this scenario should be paid to the social security number of the single member, not the EIN of the LLC. However, when I talk with commissions reps at insurance companies and/or FMOs/MGAs they tell me a lot of brokers have the commissions assigned to the LLC's / EIN. Now I am not sure if they understand I am talking about single-member LLCs disregarded entities or if they are just talking generally. However, I would lean toward following the IRS's recommendation which I have and almost all of my commissions are paid to me and my SSN but deposited in my business bank account which is under my LLC/EIN. When I get my 1099s all but a couple come in under my personal name and SSN and not my LLC/EIN.
HOWEVER, I have been thinking... I think it would be more logical if all my commissions were paid to my LLC/EIN because at any given point I could appoint a "manager" (for LLC purposes) to run the LLC and therefore that account would remain active after death whereas most bank accounts are frozen after death until probate is completed (unless there is a POD but then the account is closed anyway or unless there is a joint account holder which I am not sure is possible on a business account if it is a disregarded sole prop business unless maybe you can appoint a manager such as your spouse).
My goal would be to have all the commissions paid to the business instead of me so that if I pass or become incapacitated due to illness the business could continue receiving commissions until a new licensed agent takes over (i.e. spouse, selling the book to another agency, etc). The idea is to BUY TIME. I would think having the commissions paid to the business entity would give more time to allow for a transition to a new licensed agent, ie. spouse compared to if it were paid directly to me and suddenly I die. I would also wonder if this would make selling the book of business easier since it would simply mean selling the business. Am I way off on this one??? I think I might be but not sure. Thoughts?

You realize that IRS employees give incorrect information like 92% of the time, right?

ALWAYS have ALL commissions paid to your LLC. There is no real point in having one if you don't. Pay ALL business expenses from your LLC. Pay a salary and bonuses from your LLC to you personally.

 

[WiscBroker]

You realize that IRS employees give incorrect information like 92% of the time, right?

ALWAYS have ALL commissions paid to your LLC. There is no real point in having one if you don't. Pay ALL business expenses from your LLC. Pay a salary and bonuses from your LLC to you personally.

It's not an IRS employee telling me to use the SSN, but the IRS's website (see below). It clearly expects the individual to use their SSN on W9 forms which is what we use for assignment of commissions with insurance companies. This only seems to apply to single-member disregarded entities, so maybe it is different when acting as an S-Corp but I know that still leaves you as a single member LLC so I am not sure there is a way around that.

"For federal income tax purposes, a single-member LLC classified as a disregarded entity generally must use the owner's social security number (SSN) or employer identification number (EIN) for all information returns and reporting related to income tax. For example, if a disregarded entity LLC that is owned by an individual is required to provide a Form W-9, Request for Taxpayer Identification Number (TIN) and Certification, the W-9 should provide the owner’s SSN or EIN, not the LLC’s EIN." (Souce: [EXTERNAL LINK] - Single Member Limited Liability Companies | Internal Revenue Service)

 

[DonP]

It's not an IRS employee telling me to use the SSN, but the IRS's website (see below). It clearly expects the individual to use their SSN on W9 forms which is what we use for assignment of commissions with insurance companies. This only seems to apply to single-member disregarded entities, so maybe it is different when acting as an S-Corp but I know that still leaves you as a single member LLC so I am not sure there is a way around that.

"For federal income tax purposes, a single-member LLC classified as a disregarded entity generally must use the owner's social security number (SSN) or employer identification number (EIN) for all information returns and reporting related to income tax. For example, if a disregarded entity LLC that is owned by an individual is required to provide a Form W-9, Request for Taxpayer Identification Number (TIN) and Certification, the W-9 should provide the owner’s SSN or EIN, not the LLC’s EIN." (Souce: [EXTERNAL LINK] - Single Member Limited Liability Companies | Internal Revenue Service)

You can add family or other people to your LLC . The s corp is just the way the LLC is taxed . It could be taxed as a c corp . People choice s corp taxation because 40-60%( depending how aggressive you are ) will be paid out in dividends to avoid ss tax .