Minn Life, Pac Life, & Shurwest Sued in IUL IRA Rescue Lawsuit

By: Roccy DeFrancesco, JD, CAPP, CMP

After last week’s newsletter about Pac Life’s IUL policy being used in an IUL sales scheme, an advisor contacted me to let me know about yet another lawsuit that I thought readers should be aware of.

To read LAST week’s newsletter about the IUL sales scheme, click here.

To download IRA rescue the lawsuit (the complaint) against Pac, Minn life, Shurwest, and others, click here (FYI, Shurwest is an IMO).

Yet another IRA rescue using IUL lawsuit

I’ve been warning about this type of structure for years. I even put up my own consumer protection website warning about agents pitching this strategy. If you are NOT familiar with this strategy, go to www.stopirarescue.com and you can read all about it.

There are a number of lawsuits on this topic and this newsletter tells about another one.

The short summary of the concept is simple and deceptive:

  1. Get clients to agree that IRAs are actually tax-hostile, not tax-favorable
  2. Get clients to buy into using IUL because money can grow tax-free and come out tax-free
  3. Get clients to agree to “reposition” money from the tax-hostile IRA to the tax-free IUL

Then the agent will give a speech about income tax rates going up and how the agent can help them get into a “zero-tax” environment (the “power of zero” tax wink wink).

What’s the problem?

IRA rescue clients are old (59.5 or higher) and the concept is a mathematical LOSER!

I don’t have space in this newsletter to go over the math (go to my consumer website to learn more), but I’ve demonstrated it on dozens of occasions (including when I was hired as an expert in a case a few years ago), and I can state emphatically the math doesn’t work (and it really doesn’t work when using the new AG 49 IUL illustration guidelines).

If you have a case where you think the math does work, please forward it to me and I’ll break down the math and show you why it doesn’t.

Lessons from this week’s newsletter?

First, you can learn quite a bit from reading the complaint. It’s quite interesting how they went after the advisor not only for negligence, but on a breach of fiduciary duty claim.

Second, don’t trust IMOs! Most don’t do their due diligence on products (why else would Pac Life be the top IUL seller at a time when there is a class-action lawsuit against Pac Life for deceptive IUL sales).

Many IMOs don’t do their due diligence on sales concepts (why else would IRA rescues using IUL, Bank on Yourself/Infinite Banking/Become Your Own Banker, and Hyper-Funding even be in the industry?).

Do your own due diligence on products and concepts and work with someone you can trust.

If you are looking for an IMO you can trust, email me at roccy@wealthpreservationinstitute.net and I’ll forward you to one I know you can trust.