DOL Opinion Validates Use of Qualified Plan Ins.
National Underwriter (Life/Health) (10/23/00) Vol. 140, No. 43 p.7; Commito, Thomas F.

Recently, the Department of Labor (DOL) gave an advisory opinion (2000-10A) that has helped to validate the estate planning technique called "Qualified Plan Insurance Partnerships (QPIP)." This technique was developed to avoid problems that relate to the advantageous use of qualified plan and IRA assets. These assets are tricky because of the double taxation that occurs since they are considered "Income in Respect of a Descendent," or IRD, property. As such, the assets are fully taxable for estate tax purposes and are taxable income to the beneficiary. QPIP invests the assets in a limited partnership or limited liability company, which in turn buys life insurance. Since the assets are invested in the LP or LLC, there is no taxable distribution, so no income tax needs to be paid. The DOL Advisory Opinion 2000--10A is important because it examines whether or not an IRA can invest in an LP or LLC. In the DOL case, it did not characterize the investment of the IRA as a "prohibited transaction," emphasizing that the actual management of the assets was through an outside investment firm. If the DOL approves the opinion, it should serve to strengthen interest and stimulate discussion of the QPIP technique.


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