Reliant Life Shares, anyone familiar with these?

[Just-Lisa-Now-]

Had a client come in last night, told me "We forgot to tell you, we've been putting money in our IRA each year, we didnt know this would be a deduction."

They pull out the 5498s and I dont see any IRA contributions, just the FMV of the account that has sat at 60K for the past 5 years.

Then they pull out this list of payments they thought were being made to the IRA in all these weird amounts, multiple times per year.

I ask him how he came up with these dollar amounts and he says "that's what they told me to pay, me and a bunch of other investors are putting this money into our IRAs that are paying the premiums on life insurance contracts for people that are old and when they die, we get a payoff, so far nobody has died, but these people are all really old so Im sure money will be coming in soon"

Im sure his take on this isnt quite right...so far theyve paid over 22K to this "investment" in the past 5 years, but I dont see anything reflected in this IRA account.

Is this legit?

[IRonMaN]

"me and a bunch of other investors are putting this money into our IRAs that are paying the premiums on life insurance contracts for people that are old and when they die, we get a payoff"

I assume they are going that route after they closed down the horse racetrack where their IRA dollars used to go?

[TaxGuyBill]

It definitely does not seem like it is an IRA.

As far as if it is a legitimate investment or not, maybe?  Hypothetically, it might be possible for a company to pay the person covered by life-insurance to be the beneficiary and take over the payments.  Then when the person dies, the 'company' (and investors like your client) would receive the life insurance proceeds.

However, it sound unusual enough that it would scare me, and I would advise your client to do further research on this 'investment' opportunity.  The fact that your client thinks this is an IRA when there is no documentation of such indicates to me that either (a) your client is not too familiar with what is going on or (b) something seems really wrong.

But from what YOU need to do for the tax return, there is no indication it is part of an IRA.

[IRonMaN]

From the company's website:

What is a Life Settlement?

A life settlement is the purchase of an existing life insurance policy, by a third-party investor, for less than the face value but more than cash surrender value of the policy. Originally designed for institutional or corporate investors, the life settlement market is now available to individual investors by way of fractional life shares. This investment class has no correlation to stock or financial markets, oil prices, interest rates, or other common risk factors that most investments are associated with and often suffer from. Investing in life settlements can offer outstanding returns, while minimizing risk.

[TaxGuyBill]

Yeah, I just Googled it too, and the website looks like it could be legitimate.

But without 5498s, it doesn't seem to be in an IRA.  Unless maybe your client is doing a self-directed IRA and completely screwing it up?

[IRonMaN]

The company does exist and it possible that the investment could be within an IRA, but it doesn't sound like it was setup that way.

[Just-Lisa-Now-]

He did say something about self directed, so it may be a self directed IRA. 

I just dont understand how this really works, I think I might have scared him now that I showed him that money hes been paying isnt going into his IRA. But maybe the payout (if and when that ever happens) would be reflected in the FMV of the IRA.

I tend to warn people away from self directed IRAs, but they never mentioned this to me until last night.

I thought it odd that his 60k thats been in there for 5 years hasnt grown at all, not even some measly interest on it?  I guess hes kind of stuck now, if he pulls out, hes lost the 22k hes paid into this.  Feels weird investing in someone to die so you can collect the money.

Just thought maybe someone had seen these before.

[qbteachmt]

"but I dont see anything reflected in this IRA account."

It would not be reflected in the cash balance.

"I thought it odd that his 60k thats been in there for 5 years hasnt grown at all"

If it's not, at the least, put into a money market pool, it has no way of growing. It's basically "under the mattress."

"if he pulls out, hes lost the 22k hes paid into this."

Someone should be tracking the amounts, as he has post-tax basis. If anything in that IRA "pays off" that will reduce the tax hit pro rata. And of course, he should get out of this.

When Aids first came about, you could buy the owner's life insurance = Viaticals. This seems to be like the same concept: buy it from the owner, bundle it and flip it to these investors.I see they assume "65 and 13 years of Life Expectancy" and viaticals are based on Terminally ill.

Whole life is the worst investment around, of course; even on someone else's life. Well, "investment" is not the right word at all.

We have only had self-directed IRAs. Okay, I looked at their FAQ. Think of buying a rental house using your IRA; everything is "inside" or sheltered by the IRA, but nothing about the house is reflected in the IRA statements.

I see they have three "accounts" for your investor: Subscription escrow (gets the incoming funds), the Policy Trust, and Premium Reserve. Yep here is it:

"Premium Reserve Account - once the investor selects their policy or policies, the Trustee transfers their funds from the Subscription Escrow Account to secure their purchase and funds the Premium Reserve Account, which is administered by UMB as Trustee. The Trustee makes certain that all required premiums are paid from the Premium Reserve Account."

All the money he's been paying may simply have had to cover Premiums for the over-aged people who did not die on time.

You can get the statements for everything. Then, get him out of this.

[Just-Lisa-Now-]

"All the money he's been paying may simply have had to cover Premiums for the over-aged people who did not die on time."

I think this is whats happening.

[TaxGuyBill]

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@Just-Lisa-Now- wrote:

He did say something about self directed, so it may be a self directed IRA. 

---

Is it possible that he is just TRANSFERRING (rather than contributing) money from an already existing IRA to this?  If the 5498s show the balance is remaining the same, that is what makes sense to me.

You need to ask the client (and if the does not know, they need to contact this company) who is the "custodian" of the IRA.  This company may just merely be mechanism of investment and the client has some other "custodian" for the self directed IRA. 

For example, a person may have the brokerage Charles Schwab as the "custodian" of a regular IRA, but that money may be invested in to buying Microsoft stock.  Likewise, your client could have an already existing $60,000 of IRA (from previous IRA contributions) invested in a Charles Schwab type of company (that deals with self directed IRAs) that is just investing in this company.

[Just-Lisa-Now-]

The 5498s come from Provident. He said it was a retirement from a former employer that he rolled into Provident years ago.

Hes writing checks to Reliant.

Yeah, this isnt looking too good, Im seeing lots of complaints and low ratings for this company.

[TaxGuyBill]

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@Just-Lisa-Now- wrote:

The 5498s come from Provident. He said it was a retirement from a former employer that he rolled into Provident years ago.

Hes writing checks to Reliant.

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First, find out if the "checks" he writes are regular checks from his checking account.  For a self-directed IRA, it is hypothetically possible to have special IRA checks from Provident.  It is probably not the case, but you may want to double check that.

Assuming that is NOT the case, then the client needs to contact this company and ASK them if this is in an IRA.  It sounds like it is not (no 5498s), but he should check anyways.

If both of those are a "no", then this is not part of an IRA.  It is just an investment.

[Carias4]

I am an investor.  I called the UMB or the bank holding the money and sending the 1099, they told me that it is not setup as an IRA.  They told me to talk to my Accountant for tax advice.  I received a payment which I chose to reinvest but I was sent a 1099R.  If this is not setup as an IRA, I don't have to pay early distribution penalties, right?  I am trying to file my taxes via turbotax but the person that I spoke to said that I was being charged the penalty. 

[qbteachmt]

@Carias4 

Did you accidentally find this topic because of its title?

Because no one here can help you use TurboTax.

Also, no one here can help you know more about your investment.

You seem to be lost on the internet.

You’ve come to a Peer User community for Intuit Tax Preparation products supporting tax preparation professionals using ProSeries, Proconnect and Lacerte , and you may be looking for support as an individual taxpayer. Please visit the TurboTax Help site for support.

Thanks.

[IntuitRebecca]

Hi there,
You've come to an Intuit site supporting tax professionals, and you may be looking for support as an individual taxpayer. Please visit the TurboTax Help site for support.

Cheers!

[qbteachmt]

@IntuitRebecca 

Would you please lock this topic, so it isn't part of general internet searches? Thanks.