I educate, consult and collaborate with professional advisors of all types to help them better serve their clients.

The nature of this relationship can vary based on your client engagement practices.

There are a lot of self-proclaimed “captive insurance experts” out there, and unfortunately, many of them give the industry a bad name. As with any solution, there are lots of ways to needlessly push the envelope and cut corners. Done right, CICs are a safe, powerful and irreplaceable solution to many of the challenges facing small-to-midsized business today. You owe it to your self and you clients to learn about CICs, and the right way to use them.

If you have a client who you may benefit from a CIC solution, let’s talk. I will help de-mystify CICs, bring you up-to-date on the latest in the industry, outline the variables, identify safest path, help you determine if this is a right fit for your client, and, if it is, help set up and manage the right CIC solution to deliver maximum bottom-line results, compliance, and peace of mind.

Also contact me if you would like me to teach a CE course for you or your firm, either in person or online.

UNDERSTANDING IRS NOTICE 2016-66: The IRS recently required disclosure for 831b Captive Insurance transactions. What does this mean for CIC owners and advisors?

Micro Captive Insurance Companies (CICs) are a popular and fast-growing risk management tool employed by firms, families and professionals across America.

Over the past decade, regulatory barriers have come down, state Departments of Insurance have embraced CICs, best practices have clearly emerged, and a large industry of supporting professionals has arisen in this space.

Earlier in 2016, in recognition of the power and growing popularity of this tool to strengthen small- and mid-sized businesses, the US Congress nearly doubled the amount of tax exempt premium funds that may be paid into a CIC. As a result, many observers expect a CIC boom in coming years.

As CICs have grown, so has abuse of this tool. Unethical practitioners have manipulated the system and pushed the legal envelope to use CICs primarily as a “tax dodge.” Common tactics used by these abusers include:

• Complex and ”creative” ownership structures, including obscure offshore domiciles, trust ownership of CIC, etc.
• Shoddy or downright fraudulent actuarial studies to produce completely unnecessary “insurance policies” and highly inflated “premiums.”
• Reliance on sham “risk pools” (usually owned by the promoter) to, on paper at least, meet the legal definition of “insurance.”
• Managing of CIC reserves in a way that proves the owners have no interest in running the CIC for risk management purposes.

Due to the largely un-standardized nature of the CIC industry, and in light of the expected boom in CIC utilization, through Notice 2016-66, the IRS has recently required all CIC owners and many advisors to disclose their involvement in CICs. The stated purpose of this request is to enable them to learn how to better identify the “red flags” that indicate abuse.

With the information request being retroactive for 10 years, it is inevitable the IRS will be flooded with data. In that data, there will no doubt be mountains of clear-cut instances of abuse. CIC abusers have good reason to be alarmed by this turn of events.

This IRS information request does not change long-standing CIC laws, regulations and clear-cut case law. A good CIC yesterday is a good CIC today. Ethical owners and advisors who embrace CICs as a powerful risk management tool have nothing to fear. In fact, they can only benefit from the IRS’s efforts to “drain the swamp” and run off the unethical practitioners.