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  2. 2. RG  Consulting  Group,  LLC   Executive  Summary  -­  Roth  Alternative  Solution  (or  Synthetic  Roth  Strategy)   2010  is  the  year  of  the  Roth  Conversion.    The  IRS  has  created  a  timeline  where  one   can  pay  the  income  tax  on  their  IRA  (or  401k  or  other  qualified  retirement  plan)  and   convert   it   to   a   Roth   IRA,   where   it   can   grow   capital   gains   and   income   tax   free.     Anything  that  is  left  in  the  Roth  IRA  will  still  be  in  one’s  estate.  The  largest  objection   to  this  process,  other  than  the  fact  that  it  doesn’t  solve  the  estate  tax  dilemma,  is  that   most  Americans  do  not  have  the  capital  to  pay  the  tax  consequence.       Overfunded  life  insurance  policies  are  likely  the  only  other  place  where  one’s  capital   can  grow  income  and  capital  gains  tax-­‐free.    Thus,  rather  than  converting  an  IRA  (or   other   qualified   plan)   to   a   Roth   IRA,   coming   out   of   pocket   for   the   tax   consequence   and   having   anything   remaining   in   the   Roth   subject   to   estate   tax,   we   convert   the   IRA   to   an   index   UL   life   insurance   policy   and   finance   an   amount   equivalent   to   the   tax   consequence.  The  policy  is  owned  by  a  trust  that  will  not  be  subject  to  estate  tax.         Indexed  Universal  Life  policies  use  various  indices  such  as  the  S&P  500  and  are  able   to   credit   at   an   excess   participation   rate,   while   mitigating   all   downside   risk.     For   Example,   Minnesota   Life   (Aa3   Moody’s   rated)   currently   has   a   140%   participation   in   the  S&P  500  with  a  2.5%  floor.   This  means  if  the  S&P  gains  5.71%  in  a  point-­‐to-­‐point     year,  the  excess  cash  in  the  policy  would  be  credited  8%  (5.71  *  1.40).    If  the  market   were  to  go  down  25%,  the  cash  in  the  policy  would  be  credited  with  the  2.5%  floor.       The  lending  aspect  of  the  transaction  involves  a  financing  source  loaning  to  a  trust.     The  loan  term  is  20  years  and  can  be  prepaid  at  anytime  without  penalty.    Interest   can   be   paid   from   the   policy’s   cash   surrender   value   or   capitalized   within   the   loan.     The   rate   is   6-­‐month   LIBOR   +   350   bp’s,   with   a   floor   rate   of   4.0%.     As   of   November   3,   2010,  6-­‐month  LIBOR  is  0.45%.  Currently  this  loan  rate  would  be  3.95%  (thus,  the   4.00%  floor  rate  would  currently  apply).    This  rate  would  readjust  every  6  months.     The   trust   used   for   this   transaction   would   most   likely   be   a   South   Dakota,   Georgia,   Alaska   or   Delaware-­‐sitused   Intentionally-­‐Defective   Grantor   Trust   (IDGT).     The   unique   aspect   of   an   IDGT   is   that   the   insured   and   beneficiaries   are   able   to   access   the   cash   surrender   value   of   the   policy.     With   this   in   mind,   the   client   is   able   to   take   withdrawals  up  to  basis,  and  policy  loans  if  they  need  income  during  their  life,  while   keeping   the   death   benefit   of   the   policy   outside   of   the   estate.     Thus,   generational   wealth  transfer  is  greatly  enhanced  while  maintaining  retirement  cash  flow.   In   effect,   the   Roth   Alternative   Solution,   or   Synthetic   Roth   Strategy,   is   an   enhanced   version  of  a  Roth  IRA  that  optimizes  generational  wealth  transfer  while  effectively   shielding   one’s   retirement   nest-­‐egg   from   market   downturns.     The   capital   in   the   policy   will   grow   annually,   normally   without   income   tax   and   capital   gains   tax.     The   original  tax  consequence  due  to  qualified  plan  conversion  is  financed.  The  insurance   products   have   guaranteed   floors   to   mitigate   all   downside   risk   and   to   promote   growth   and   preservation   of   capital,   and   excess   participation   to   achieve   returns   above  those  of  traditional  equity  market  indices.    All  of  this  occurs  while  keeping  the   asset  out  of  one’s  estate  by  using  an  Intentionally  Defective  Grantor  Trust.     Ryshard  Grzanka,  RG  Consulting  Group,  LLC             Phone:  (917)  715-­‐0758   THIS SUMMARY IS NOT AN OFFER OR A COMMITMENT TO EXTEND CREDIT IN ANY FORM AND REMAINS SUBJECT TO, AMONG OTHER THINGS; (I) CREDIT APPROVAL, (II) DUE DILIGENCE AND (III) MUTUALLY SATISFACTORY DOCUMENTATION. RG Consulting Group, LLC., makes no warranties or representations as to the accuracy and completeness of the information contained in this communication, including any attachment(s) thereto. The information contained herein is provided for the convenience of the recipient without any warranty of any kind, express or implied, and are not intended to provide specific advice or recommendations for any individual or entity. RG Consulting Group, LLC., recommends that the intended recipient consult their own attorney, accountant or tax advisor with regard to their individual situation.  
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