So your Charitable IRA works and others may not? What is the average case? I may be working with some deserving charities soon to help them raise money.
I am the tax attorney that developed the "Charitable IRA", commonly referred to as the CHIRA TM concept approved in PLR 200741016 after several years in review with the IRS. In May of 2008, I received correspondence from the NY DOI (search 200741016, New York, Insurable Interest). A patent application was filed for this in 2005 and this can be found at the USPTO website searching for Delaney as inventor.
The NY DOI correspondence indicates that life/SPIA arbitrages will fail for lack of insurable interest.
Can you point me to this please? I didn't read that at all. Just for the record, I've never seen an "arbitrage" case where the math worked, but I've also never heard the "lack of insurable interest" argument and don't see how that's applicable.
Re: CHIRA - wouldn't a similar structure loan work even more easily if the donation came out of liquid assets as opposed to an IRA?
So your Charitable IRA works and others may not? What is the average case? I may be working with some deserving charities soon to help them raise money.
Yes, in addition to subjecting the charity to intellectual property issues, this planning is very form driven. As with any planning, there are factors to be considered. Short cuts are dangerous when dealing with any tax exempt or deferred entity. After completing the regulatory approval stage and product development, we have several charitable organizations that have approved the plan and are in various stages of donor engagement. The cases vary in size ($50k - $1M+) and we anticipate our first several closings within 60 days. We have methodically planned the introduction of this planning for over 7 years and it is important to properly educate the charitable organization and screen the proper donor. Measure twice, cut once.
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Originally Posted by joeblow
Can you point me to this please? I didn't read that at all. Just for the record, I've never seen an "arbitrage" case where the math worked, but I've also never heard the "lack of insurable interest" argument and don't see how that's applicable.
Re: CHIRA - wouldn't a similar structure loan work even more easily if the donation came out of liquid assets as opposed to an IRA?
Sorry, I can't figure out how to post the site b/c I don't have enough posts to this forum. However, go to Google, use the search terms I mention (200741016, New York and Insurable Interest) and you will see the correspondence. It pulls up as Insurable Interest. Simplistically, putting yourself in the shoes of the charity, if the closing proceeds are distributed 95% to a life policy and annuity contract, the net effect to the charity is nominal from a current cash flow perspective. Historically, and without getting too much into the pros/cons of this arbitrage, it has been gaming such as this that, while enriching the agent, leaves the charity questionably lacking. At least that is the apparent position of the NY DOI. As a board member of a charity, I would probably come to the same conclusion notwithstanding the fact the annuity contract is owned by the charity. We want the plan to benefit the charity today and return to family upon death. With any case, it is critical to plan for exit strategy.
With respect to your second question, yes, if an individual had liquid assets outside of the IRA, they could certainly make a gift of their insurable interest (as they do in CHIRA TM) along with a gift or loan of cash to charity to sustain the premium. This is, however, a different fact pattern. The thrust of CHIRA TM is to enable donors, with significant retirement accounts, to redirect this economic power in a pre-tax manner for the benefit of charity. In your facts, the liquid assets have presumably been taxed and are in the donors after-tax environment.
Last edited by Doug Delaney : 06-05-2009 at 10:25 AM.
Reason: Posts merged
Has anyone looked at the recent idea that costs $3,500 per month to become a "licensee"? It sounds like agents all over the country are going to Grand Rapids to see a charitable giving programbased on a SPIA and a no lapse Life contract, not tied to an IRA. Claim is 28k. average commission. Is this just a scam to get agent's money or can it actually work?
Yes, I worked with them. Past tense. Very expensive lesson. You can email me if you like.
I would greatly appreciate having a discussion with you. I have been at a presentation and am considering working with them on their "Legacy Program". Can I call you to discuss your experience with them? Thanks.
My advice: Be very careful with these guys. I participated in their seminars, and by their own admission, their marketing strategies and business model are all borrowed from Dan Kennedy (you can learn it from his books instead). There is even some dispute about the legality of their claimed trademarks on financial and tax planning concepts.
My experience: I had received a written guarantee from their principal that they failed to honor in a timely manner. After over 6 MONTHS of e-mails, faxes, and voicemail messages that were ignored or passed from desk to desk, I was forced to hire an attorney to help me collect my guaranteed refund. Yes, I eventually received the refund, but the cost and time to collect this refund indicated a lack of professionalism and integrity.
They seem to be on a major nationwide recruiting drive right now. They are dunning my email every day from different email addresses. They are having "seminars" all over the country as well as in their own office. There is no way they could service all of the agents they are trying to line up.
The pitch is that they have tons of clients just waiting to sign up if only there were enough agents. And just one sale could be enough to allow you to retire.
Of course, the agent is asked to send GTBK $3,500 a month for the privilege of participating. Oh, and by the way, there are other agents in YOUR area just waiting to sign up and whoever is first, is the one who gets in. Better hurry! (I'll bet they will sign up everyone who can fog a mirror, even if they all live right next door to each other.)
I found out, they have an "F" from their local Better Business Bureau. I requested a response from them regarding that fact, but they just ignored me. Too bad others can't be given this info.
My wife and I recently received two postcards from them with a website link and the presentation looked interesting. However, I was lost on the pitch of investing $3500 a month for a short period of time (no time length). By the way, the FINRA report did not look too impressive.
No one has posted the "strategy" that GTBK is using. No one has explained in detail what it is they are doing. Delaney says it is wrong or fails the ethics etc, but even he doesn't say what they are doing.
1. How does the strategy work?
2. How does this strategy cost nothing to the donor?
3. What does it provide to the charity? they claim it provides CASH TODAY but no one is explaining this, where its coming from, the draw on the customers assets
4. People have claimed that GTBK is using bank products or some kind of premium financing with this, but none have explained what or how or cost or process or procedure, nothing.
5. People have claimed that GTBK is using "arbitrage" in this, and insurance agents say those fancy words only to make themselves sound like they know something. Usually arbitrage to an insurance agent is just taking one asset and cashing it in to invest in a higher yielding one, or taking a loan from some source to HOPEFULLY recieve a better yield than the cost. What REAL arbitrage is being used here? this is not explained at all. It is not even explained what 'considered arbitrage' is being used here.
6. What products are being used here and how? what features do they have? what providers are being used? again nothing said.
Can anyone answer these most basic of questions which have been asked over and over yet have not been answered here at all?
Update to my experience with GBTK. When I went to their meeting they promised we could back out at any time in the first session. Since the first session was the same as the initial presentation, I felt duped, and tried to get out of it that night. The handler "Dan Kaufman' kept telling me to talk to Dennis the next day.
When I talked to Dennis (he wasn't there until about 11am) he told me I could not get a refund because I had shown up that morning. What a scam! They say you can get out of the contract but they push you past the 'time' so they can keep hitting your credit card for the rest of the funds.
I filed with the Minnesota Commerce Department and my credit card company ... but have yet to hear if I can get my funds returned.
I have neither enrolled nor participated in a GTBK seminar but am aware of their publicly available marketing information. So, I share this only through gleaning what I read in their materials delivered by email, etc.
The plan GTBK appears to offer has morphed over time and is now a plan largely funded with after-tax dollars (as opposed to pre-tax IRA investments as in CHIRA®). Their "boot camps" appear to offer planning similar to charitable life / annuity arbitrage similar to those rejected by the New York Department of Insurance (I can't yet post the URLs on this forum but google "New York Insurable Interest 200741016") combined with something similar to the CHAR-FLP listed transaction in IRS notice 2004-30 (using a form of flowthrough entity such as an LLC or LP) and discussed more fully in AALU Bulletin No. 04-50 (which you can google).
Their plan, which is nothing new, appears to involve a loan from donor/insured from after-tax funds to a minimially capitalized LLC/LP. The loan proceeds are used to fund an insurance policy collaterally assigned back to the donor (not their IRA) in repayment of the loan and a commercial annuity to service interest payments. Donor then transfers equity ownership of the LLC/LP to charity claiming an arguably unsustainable deduction. The numbers are pretty convoluted on these deals, especially when adding in the life/annuity arbitrage.
Donors should be very cautious about plans that tout deductions "without cost." Economic impoverishment of the donor is a benchmark of whether an item is deductible. Substance over form is the wide net used by the IRS in these cases, especially where the marketing materials (which are certainly discoverable) say there is "no cost". Wow! In these type of plans, the deduction presumably comes not through a gift of cash but a hard to value LLC membership interest. As a listed transaction means the parties must disclose it fully to the Service. So, what seems like a good thing in today, comes to light on April 15.
I am not necessarily stating that life / annuity arbitrage is a bad thing, just that it potentially compromises insurable interest if used at the wrong time (contemporaneously with the closing with the policy), with the wrong parties (charities) or without full representation to insurers. Regardless of one's stance of whether life / annuity arbitrage is appropriate, the use of flowthrough entities itself is fraught with complexity. Consider management and reporting issues which can certainly grow tiresome to the most well inclined donor or agent. Most prudent charities will run from these types of plans as they often see their tax exempt status as the compromised umbrella under which these "high commission" deals operate. In all events, though, the plan offered by GTBK is not a true "pre-tax" plan as is the novel CHIRA® plan. It truly is something new.
CHIRA® is structured to promote honest and lasting relationships between charity, donor and agent without pulling a fast one on taxpayers, donors, charities or insurers. I welcome you to read more about it on our websites ( chirausa and chirafinancialservices dot com). We have a good benefit illustration on the chirausa site that may be helpful.
I recently attended a GTBK Marketing "Preview" for the Immediate Legacy Program. I'm not quite sure where to start here... to begin with I and many others were blindsided by a "Primary Agent" program that was not covered in Webinar and Seminar within literally minutes of beginning the "Preview". Why was that not brought up beforehand? That's not what I signed up for to travel to MI at about a $1,000 expense to me.
First day indoctrination 8 AM to 8:30 PM. Second day is totally a review of the first day (reviewed quickly at three times ) and a strong sales pitch. Mr. Tubbergen has some Time Share sales in his background, the second day this came out. I felt like I needed a shower after the second day, very sleazy... there was a LOT of side stepping and no proof sources of any agent having experienced success with his Immediate Legacy program. Of about 70 people there, I guess around 15+ bought in at over $50,000 in costs to become a "Licensee", these folks are quickly moved away from the remainder of the folks whom still have their money in the pockets and segregated for orientation of their "Fast Start Program". The remainder of us whom chose to stay and eat lunch are then offered a "Plan B", which is around $25,000 to become a Licensee with them. I believe a smaller group bought into this program.
Mr. Tubbergen is adamant in hawking his "Patent Pending Process", and then admits that one part of it that makes it unique, (the Charitable LLC), it's really nothing more than arbitraging insurance products using annuities (SPIA's) and life insurance and leveraging them to create return and pay for the life insurance. This is nothing new and has been practiced since the 80's or earlier.
Do not attend these meetings unless you are a fool and want to part with your money... BTW a patent pending search returns nothing related to Mr. Tubbergen nor any of his companies, there are several patent pending processes that resemble his program, but none have been granted an patent and many have been applied for many years. Again, exercise extreme caution before buying into this operation...
Mr. Tubbergen and others professed that they used to give this program away for free, and then it cost $5,000, and is now up to over $50,000, they also warn that the cost of this going up in the future, truly a use of fear tied to "a call to action" if I've ever heard one... they mention "a lot of agents" and "a number of agents" and that of over 240(+-) agents only around 100 are active, WHY IS THAT? There was mention of ONLY ONE agent whom just recently had some success at this program. There was a very unconvincing appearance of a local stock broker whom had used the program, but his lack of emotion and vagueness left me wondering... there was a lot of BIG TALK about a hospital and a sports agent and a lot of possibilities but it was just that. There is much touting of their "languaging" and presentation, but I just don't see it, and certainly did not hear it!
WARNING: There are a great deal many of people whom are actively seeking "Sub-Agents" on this program to gain access and become Sub-Agent Licensees to this "Immediate Legacy" program. Beware of this too, it's nothing more than these suckers trying to recoup their losses by taking $5,000 or more from you to buy in. I'd call that multi level marketing, wouldn't you, (in reverse!)? Again, exercise extreme caution with this and leave your money at home, only pack and travel with your good common sense!
Was unable to attend the seminar in OK City in late October and was invited to attend a Webinar a week later. Very interesting concept and discussed with attorney to get his thoughts - he agreed if the numbers stood up it all looked really good. When I asked about the SPIA returns during the webinar, Turbergen said he had 56 carriers to shop the best rate for each case. Pretty exciting.
I decided to verify the key necessity for his plan to work before signing up for his seminar: An 11.8% net annual return on a SPIA for an age 70 male. Unfortunately, I went to ANICO and The Principal (both SPIA leaders) and they couldn't touch the number Mr. Turbergen used in his sample case. He was showing a 40% higher return than the better of those two quotes. Something is wrong here - all carriers are working in the same investment pond - I don't believe any single carrier can outperform the market leaders over a period of 25-35 years life expectancy by 40% and survive. This is a pretty definitive bit of misinformation.
I am forced to believe this is therefore a con game. Too bad. The guy is obviously pretty sharp. Just has no character.
Re: GTBK Marketing Dennis Tubbergen
Re: GTBK Marketing Dennis Tubbergen
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