ORLANDO, FL–(Marketwire – November 17, 2010) – The Life Insurance Settlement Association (LISA) praised today’s decision regarding insurable interest by New York’s highest court. ”Consumers won a resounding victory today,” said Doug Head, LISA Executive Director. ”This decision emphatically affirms property rights and the vitality of the secondary market.” LISA was pleased to submit an amicus brief to the court.

In Kramer v. Phoenix, the New York Court of Appeals was asked by the U.S. Second Circuit Court of Appeals to determine whether New York insurable interest law prohibits an insured from procuring a policy and “immediately transferring” it “if the insured did not ever intend to provide insurance protection for a person with an insurable interest in the insured’s life.”

Although most states, including New York, now prohibit an immediate transfer under LISA-initiated life settlement legislation that requires a two year waiting period before resale, this opinion has far-reaching impact going forward, Head explained. ”The Court grounded its decision in insurable interest law going back to the 1800s, and definitively concluded that an insured can take out a policy for any beneficiary, and any purpose. Thus the ‘intent’ question is relevant under today’s life settlement laws even if the ‘immediate transfer’ question is not.”

Head noted that the Court expressly followed “the common law rule that an insured has total discretion in naming a policy beneficiary” and that “When one insures his or her own life, the wagering aspect is overridden by the recognized social utility of the contract as an investment to benefit others.” The Court made a “basic distinction between policies obtained on the life of another and those obtained on one’s own life.”

“The Court recited and rejected insurer arguments ‘that a policy obtained with the intent to assign it to a party lacking an insurable interest violates’ insurable interest,” said Head. ”This nails it down: Insurers’ attempts to construct an intent standard through endless litigation is a failure.”

Head noted that the New York court’s decision in Kramer follows the U.S. Fourth Circuit Court of Appeals decision in First Penn v. Evans in 2009, which concluded that “evaluating insurable interest on the basis of the subjective intent of the insured at the time the policy issues… would be unworkable and would inject uncertainty into the secondary market for insurance.” Head said, “we believe that the insurance marketplace, as a whole, will benefit from this assurance.”

“In both First Penn and Kramer, U.S. Courts of Appeals have directly addressed the question of whether an insured violates insurable interest by procuring a policy on his own life with intent to resell. The Fourth Circuit rejected that argument last year and the New York Court of Appeals has now told the Second Circuit the same thing,” said Head.

“This case is very important. Insurance is property. Carriers simply cannot second-guess why a consumer buys a policy on his own life. The insured’s reasons for buying a policy — including as an investment — are his own. The confidence of all in the insurance market is enhanced with this decision,” Head concluded.

DETROIT — Insurance companies can use a person’s credit report to determine rates, the Michigan Supreme Court said Thursday in declaring that state regulators exceeded their authority when they banned the practice as discriminatory.

The decision ends a legal battle between insurance companies and Gov. Jennifer Granholm’s administration that has reached three courts since 2005.

The industry says people with strong credit reports make fewer claims and deserve lower rates than people with weak credit reports. The Supreme Court, in a 4-3 ruling, said Michigan law allows companies to offer people with good credit lower rates.

“It is difficult to see how offering discounts to some insureds on the basis of good insurance scores is inconsistent with the (law’s) general purpose of availability and affordability of insurance for all consumers,” Justice Maura Corrigan wrote in the majority opinion.

Corrigan and fellow conservatives Stephen Markman and Robert Young Jr. were joined by Justice Elizabeth Weaver.

Insurance companies have been allowed to use credit reports for home and car rates while the dispute was tied up in the courts.

“This decision is a win for Michigan policy holders,” said Peter Kuhnmuench, director of the Insurance Institute of Michigan, which represents 39 companies. “Insurance carriers will continue to be able to offer discounts to policy holders who are less likely to have a claim.”

Democratic Party Chairman Mark Brewer signaled he would make the case a campaign issue for Young, a Republican who is seeking re-election. He didn’t, however, criticize Weaver by name. She has run as a Republican in the past but is seeking another term as an independent.

“Voters are tired of being put on the back burner so insurance companies can make a heftier profit,” Brewer said.

Chief Justice Marilyn Kelly and justices Diane Hathaway and Michael Cavanagh said they would have upheld the actions of Michigan insurance regulators.

“I would … hold that the uncertainty surrounding the accuracy of credit reports is evidence per se that a classification system based on those reports is unreasonable,” Kelly wrote.

-By ED WHITE (AP) – Jul 8, 2010 The Associated Press

IRVINE, Calif., June 29 /PRNewswire/ — Expiring tax provisions, or “sunsets,” have long been a feature of Uncle Sam’s tax code, but they usually involve relatively minor provisions. The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) depart dramatically from this pattern. All tax provisions sunset by the end of 2010 – and, for many investors, parting will be such sweet sorrow.

Collectively, EGTRRA and JGTRRA reduced tax rates on ordinary income, long-term capital gains, and qualified dividends; mitigated marriage penalties; expanded the child tax credit and the child and dependent care tax credit; and phased out limitations on itemized deductions and the phase-out of personal exemptions. With the sunset of these provisions, individual income tax rates in 2011 will revert to higher, pre-2001 levels. During the presidential campaign, President Obama said that he would make the 2001 tax cuts permanent for low- and middle-income taxpayers, and that wealthy Americans would pay more. Currently, it’s expected that for individuals earning more than $200,000 or couples making more than $250,000, rates will indeed revert to pre-2001 levels.

A consortium of advisors who are representatives of and offer securities through Securities America Inc. (www.securitiesamerica.com) offer these suggestions for how investors and their advisors can adjust to a new tax landscape:

#1. Catch the early bird special. In anticipation of higher tax rates, if your portfolio includes appreciated assets, this year might be a good time to take some gains off the table at the maximum capital gains rate of 15 percent, rather than the 20 percent currently slated for 2011. Investors in the 15 percent tax bracket or lower have no gains due on appreciated assets in 2010, but will face a 10 percent tax in 2011.

“In many cases, I’m recommending investors sell appreciated assets now because they will never see capital gains rates as low in their lifetime,” says Don Patrick, CPP®, managing director of Atlanta-based Integrated Financial Group (www.Integrated-Financial-Group.com). “Investors might also consider accelerating the sale of a home or business to avoid higher tax rates down the road.” Patrick notes that unlike when investors use tax loss harvesting to book a capital loss at the end of the year, there’s no wash sale rule that precludes them from buying a security right back when they sell it and register a gain.

#2. Diversify retirement savings from a tax standpoint. Having taxable and non-taxable pots to draw from makes sense in an uncertain tax environment. The good news, says Jim Coleman (founder of Coleman Financial Advisory Group in Waterbury, Connecticut – www.ColemanAdvisoryGroup.com), is that the lifting of the $100,000 income limit for converting a traditional IRA to a Roth IRA makes diversifying possible for all taxpayers. Today, anyone–regardless of their income–can convert retirement assets from a traditional IRA to a Roth. According to Coleman, a Roth offers three major benefits: Tax-free growth that is especially attractive considering income tax rates are likely to go up in the future; tax diversification that provides flexibility in retirement income distribution planning; and no required distribution at age 70-1/2 that helps transform your retirement savings into a financial legacy.

“Obviously, converting retirement assets to a Roth would result in reportable income and trigger additional income tax – and it may be difficult to consider paying income tax on a large IRA,” Coleman notes. “However, it’s important to realize that you don’t need to convert the entire account. While investors who converted in 2010 can spread taxes due over 2011 and 2012, those in the higher tax brackets may be better off having paid all those taxes in 2010. In promoting the extra time to pay, Uncle Sam fails to mention that the top tax bracket will increase to 39.6 percent from 35 percent in 2011. Either way, if the nation is indeed entering a long period of rising income tax rates, paying a conversion tax bill may seem like a bargain in retrospect.”

#3. Use fraud losses. Because the Roth conversion is an ordinary income taxable event, taxes due can be offset by major losses due to fraud which are booked as an ordinary income loss as opposed to a capital loss, says Arthur Cooper, CFP®, managing partner of Cooper McManus, a wealth management firm located in Orange County, California (www.CooperMcmanus.com). “If you have the misfortune to take a straight fraud and theft deduction, you can convert the same amount from a traditional IRA into a Roth IRA conversion and end up with zero tax on that conversion,” says Cooper. “The strategy is a way of making lemonade out of a very sour lemon.”

Cooper notes it’s also possible to go back a few years for loss carry forwards to add to write-offs of ordinary income. “When you go back and zero-out tax liability, you save that 10-15 percent on a good chunk of the dollars,” he explains. “Plus, when you do a Roth IRA conversion, you convert taxable dollars into a future non-taxable income stream, so the effective tax savings is even more impactful than just zeroing out your tax liability.”

#4. Rethink some standard financial planning advice. While he traditionally spends time with high level executives discussing the benefits of deferring some salary, Mike Flower (partner at Financial Principles located in Fairfield, New Jersey – www.FinancialPrinciples.com) is advising high wage-earners who have the flexibility to receive ordinary income this year instead of in a later year when tax rates may be higher. “Executives might decide to exercise their non-qualified stock options,” he notes. In another departure, if future income tax rates truly skyrocket, Flower says tax qualified plans may lose some of their appeal. “You still want to contribute to your workplace plan, certainly enough to qualify for any available company match, but with the question of whether you truly will be in a lower tax bracket in retirement, you might also consider funding accounts outside the tax-deferred arena for some diversity,” he explains. “If your company’s retirement plan offers a Roth option, you might consider that so you have a pool of money to pull from in retirement where you will not owe taxes on distributions.”

Finally, while financial advisors traditionally encourage clients to make charitable contributions before the end of year, Flower says if you are considering a substantial charitable donation, you might be better off from a tax standpoint to spread it out or defer it to the future to gain a greater tax deduction.

#5. Understand your father’s dividends will cost you more. Currently, the maximum tax rate on qualified dividends is 15 percent, but that will revert to regular income tax rates in 2011. “Although President Obama has proposed a tax of 20 percent for both capital gains and dividends in 2011, if the reclassification of dividends lapses at the end of 2010, next year the top dividend rate could revert to 39.6 percent. Still others talk about a tripling of the current 15 percent rate,” explains Clyde Wyatt, CLU, CFS, a director at Dallas-based Navigation Financial (www.NavigationFinancial.com). “Whatever happens, the increase in tax on qualified dividends obviously makes dividend paying stocks less attractive in a retirement income stream.”

In addition, starting in 2013, the Healthcare and Education Reconciliation Act of 2010 will levy a new 3.8 percent Medicare tax on investment income for individuals earning more than $200,000 or couples earning $250,000. Notably, the 3.8 percent surtax does not apply to distributions from IRAs and other qualified retirement plans like 401(k)s, 403(b)s and 457 plans, or Roth IRAs.

Continues Wyatt, “Because income from tax exempt and tax deferred vehicles like municipal bonds, tax deferred non-qualified annuities, life insurance, and non-qualified deferred compensation do not count as investment income, investments in these vehicles should become more favorable relative to investments producing income subject to the tax.”

The net effect of the capital gain tax increase and Medicare tax will be a 23.8 percent tax rate for higher earners–the highest rate for long-term capital gains since 1997, says John Jenkins, AEP®, EA, CFP®, president and CEO of San Diego-based Asset Preservation Strategies (www.Asset-Preservation.com). “Once these higher rates kick in, high wage-earners may try to defer income in an effort to stay below the highest tax thresholds. We’ll also be considering some advanced planning strategies to offset tax liability through the use of Section 42 tax credits (low income housing tax credits) and also oil and gas investments.”

In Jenkins’ view, it’s ironic that the economic impact of these tax increases will be felt by the very investors who could help promote long-term economic growth. “In 2007, taxpayers with incomes greater than $200,000 reported 47 percent of all interest income, 60 percent of all dividends and 84 percent of all capital gains,” he notes. “And the Joint Committee on Taxation estimates the new Medicare tax on investments will cost high-earning taxpayers an additional $30 billion annually. Further, because the modified adjusted gross income threshold at which this Medicare tax will apply will not be indexed for inflation, going forward an increasing number of taxpayers will be snared by this tax provision.”

Bottom line? The tax code is in a state of flux. In addition to these changes, the federal estate tax has already expired. If Congress doesn’t act, estate taxes will be reinstated in 2011 at a rate of 55 percent for estates valued at more than $1 million. While portfolios have to be re-examined in light of this change and the anticipated sunsets, planning can be done only on the basis of educated assumptions. Accordingly, it’s important to stay in close touch with your financial advisor so you can prepare for major changes and take advantage of any emerging opportunities.

Click to view a table that compares what income tax will look like in 2011 (after the sunset at end of 2010) with what the tax picture is today and could remain if we see a permanent extension of the 2001 and 2003: http://www.taxpolicycenter.org/taxtopics/2011_continue_2001cuts.cfm

Web site: www.coopermcmanus.com

Source: Cooper McManus

NEW YORK, May 26 /PRNewswire/ — GfK Financial Services, a division of GfK Custom Research North America, today announced highlights from a new OmniWeb survey that reveals almost half of Americans (42%) prefer the government take a less significant role in the financial services industry. Comparatively, only 26% of respondents say they’d like to see more government involvement.

Political Lines Blurring… Blue States Align with Red

Surprisingly, “blue states” are in agreement with their Republican counterparts when it comes to government involvement in the financial services industry. In fact, more respondents on the predominately Democratic West coast report they would prefer to see a lighter federal hand in Wall Street affairs (46%) than their “red state” neighbors in the Midwest (44%) and the South (41%). Additionally, over one third (36%) of Americans who live in the Northeast also prefer less government involvement. To compare, 28% of respondents in the Northeast say they’d actually like to see more of a federal presence as well as 27% in the West, 25% in the Midwest and 23% in the South.

Across the Demographics… Americans Want Less

More men (46%) than women (39%) say they prefer less government involvement in the financial services industry. Additionally, while respondents across all age groups agreed they’d like to see less of Uncle Sam on Wall Street, Americans 65 and older were more likely to prefer less government involvement (54%) than younger generations (34% among 18-to 24-year-olds). Results also show that households with the highest reported annual income ($75,000 plus) actually prefer more government involvement (38%) than any other income segment (25% among households that make less than $20,000 annually).

“With the slow economic recovery, the sheen is off the federal stimulus packages,” explains Douglas Cottings, Managing Director of GfK Financial Services. “Americans are growing weary and earning back their trust in Wall Street and Washington is still a major sticking point. To help turn the tide, it’s critical for financial companies to refocus their time and resources on first repairing the damage to their reputation in order to win back consumer confidence.”

Additional survey findings will be released at the Life Insurance and Market Research Association (LIMRA) Marketing and Research Conference in Orlando, Florida as part of the June 4th presentation, “Winners and Losers: Recession Impact on Perceptions of Companies.”

About GfK Financial Services

A division of GfK Custom Research North America, GfK Financial Services is a leading provider of market research to the global financial services industry. With focused expertise in traditional and non-traditional financial service industries, clients of GfK Financial Services include retail and commercial banks, credit card companies, investment banks, brokerage and securities firms, property and casualty insurers, life and health insurers, asset managers, consumer finance companies and other diversified financial institutions, as well as their trade and professional associations. By qualifying and quantifying what the stakeholders of their clients need and value, GfK Financial Services partners with financial institutions to rethink assumptions and identify strategies for business improvement.

About GfK Custom Research North America

Headquartered in New York, GfK Custom Research North America is part of the GfK Group. The GfK Group offers the fundamental knowledge that industry, retailers, services companies and the media need to make market decisions. It delivers a comprehensive range of information and consultancy services in three business sectors Custom Research, Retail and Technology and Media. The no. 4 market research organization worldwide operates in more than 100 countries and employs over 10,000 staff. In 2009, the GfK Group’s sales amounted to EUR 1.16 billion. For more information, visit www.gfkamerica.com. Follow us at www.gfkinsights4u.com or on Twitter @gfkamerica.

Source: GfK Financial Services

(Backdated 14 January 2010)—After the 6.5-magnitude earthquake that struck Eureka, CA over the weekend, California Insurance Commissioner Poinzer requested that California residents purchase earthquake insurance.  Coincidentally, 70% of earthquake insurance in the state of California is provided by the California Earthquake Authority (CEA), a state-sponsored, private-public partnership.  But the state’s $20 billion budget gap provokes the question, is a state-sponsored earthquake-insurer to be relied upon in time of need?

How is it “state-sponsored” and “private-public?”

What it means to be state-sponsored in this case is not that the CEA receives tax dollars but that the organization is a state inception and continues to be regulated by the state government (beyond the regulation of ordinary insurance laws).  As a perk of state sponsorship, the CEA enjoys exemption from federal income tax.

The CEA is not structured like an ordinary insurance company.  It’s a state-run club of 16 private member companies, who conduct their business according to CEA standards.  It sounds a bit like a guild, but whereas guilds were historically guilty of artificially driving prices up by controlling an industry, the CEA rather presents the danger of making prices too low.

How are low premiums and deductibles a danger?

The usual danger is that government-sponsored businesses tend to undercut their citizen-owned competitors (because government sponsorship often entails special funding or tax exemptions).  Thus, private enterprises are driven to bankruptcy, and the industry becomes socialized de facto.

The matter of more immediate concern to the California earthquake insurance shopper, however, is that if insurance products are too affordable, the insurer may ruin its ability to pay claims when they’re really needed.  The insurer sells too many policies and takes in too few premiums.  Is the CEA in any danger of overreaching its capital base?  Indeed it appears unlikely that it will be able to meet its financial obligations if a large earthquake strikes a highly populated area:

An illustration

The CEA currently holds $8 billion in claims-paying capacity to support 750,000 earthquake insurance policy owners.  The densely-populated Bay area holds about 138,594 of them.  In the event of a major earthquake there, an average of only $58k per claimant would be available—a scant payment in an area whose average home value lies between $500k and $750k.

The CEA is not permitted to declare bankruptcy, but this protective regulation will not put money into the hands of policy owners in the event of a major disaster.

Cheaper earthquake insurance in the future

The CEA is currently pressing for legislation to allow it to further reduce its premiums and deductibles.

The efforts of a government-sponsored business to make its products outlandishly affordable recalls to mind Congressman Barney Frank’s vision of making US housing affordable for even the most profligate in Fannie Mae and Freddie Mac’s subprime loans to high-risk applicants.

News you can use

Homeowner’s insurance does not cover earthquake damage.  If you can’t afford to rebuild your home right now, and if you live in an earthquake-prone zone (like much of California) consider obtaining earthquake insurance.

The chance of a large earthquake hitting CA in the next 30 years is over 99 percent, the chance of one hitting the Bay area in such a time frame is estimated between about 65 and 70 percent.

It’s 2010 at last, and that means that the long-anticipated federal estate tax repeal is upon us.  You read it right: if you die in 2010, your estate will not be taxed.

How long has the repeal been anticipated?  The 2001 Tax Act provided estate tax legislation for the years 2002–2009, followed by a year without.  In 2011, the estate tax is to return with the same exemption and rate that it held in 2001, a higher rate than during the span 2002–2009.

A year free of estate tax is not to everyone’s liking, however: the House of Representatives voted 225-200 (a 52.9% majority) in favor of extending the estate tax policy of 2009 into 2010.  The House’s decision was not reached until last month, however, and the Senate adjourned without ever addressing the bill, so the action was never carried.

Picking up where the Senate dropped the ball is President Barack Obama, calling again for an extension of the 2009 estate tax into 2010.  Some invigilators (including moneywatch.com and Mayer Brown) address the likelihood that our federal overseers will install the 2010 estate tax and furthermore make it retroactive to 1 January, which will surely prove an irritatant to those who suffer bereavements in the interim—not to mention violate the ex post facto prohibition of the U.S. Constitution, Article 1 §9.  (After all, the constitutional prohibition has not always prevented ex post facto legislation in the past.  Wikipedia points to the Adam Walsh Child Protection and Safety Act of 2006 for an example.)

Is it likely that the estate tax will be back later this year?  With both the House and the President behind it, it ought to be.  With an ever-accelerating federal deficit, our administrators are hardly to be expected to pass up on the $25 billion per year that estate tax brings in.  Moreover, the estate tax falls well with the current administration’s affinity for taking from the unpopular rich in order to win voter support from the majority (consider the 90% bonus tax bill passed by the House last year for another example).

In 2009, the estate tax exemption stood at $3.5 million, with a tax rate of 45% for every cent after that.