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Account Receivables (A/R) Leveraging

Course Objective


This course was created to teach and educate accountants, CPAs, EAs, attorneys, financial planners and insurance advisors about an important asset protection topic that can help many small to medium size businesses.


The biggest asset in many companies, especially professional companies, is the accounts receivable (A/R). Doctors, lawyers, CPAs/accountants, sometimes have millions of dollars in A/R on the books at any given time.  With professional liability suits getting out of control, it is important for many clients to asset protect their company’s biggest asset, the A/R. 


The information to follow will teach readers about the various ways a client can asset protect their company’s A/R and will point out how many advisors around the country are doing it wrong.  The wrong way to protect A/R is much more appealing, but has many pitfalls that can get the client in trouble from a tax standpoint.  By using the “correct” way to asset protect a client’s A/R advisors can show value added service to clients and solve a problem that most clients likely did not even know existed. 


Accounts Receivable

Asset Protection


1) A/R Financing: The Basics

a) Shielding the A/R from creditors and lawsuits

b) Converting a stagnant asset

2) Common Elements

            a) Loan collateralized by A/R

b) Cash value life as an investment


3) The First Generation of A/R Financing Plans

           a) borrow from a third-party lender

           b) single premium immediate and life insurance purchase

           c) “modified endowment contract”

           d) Forfeiture

           e) Pledging assets

           f) Plan termination

           g) Payment shortfall


4) The Problems

a)Deductibility of Loan Interest

b) Timing of Inclusion of Income

c) Substantial Risk of Forfeiture

d) Prohibited ERISA Transaction


5) Tax Consequences to Client

           a) Application of Split-Dollar Rules to Life Insurance Policy

i) the loan regime

ii) the economic benefit regime.

b) Determining “Owner” of Life Insurance Policy

            c) General Tax Law Principles Apply

d) Taxation of Cash Value Build-up

i)The IRS, in TAM 9604001

            ii)Section 72(e)(6) of the Internal Revenue Code

e) Guidance from the split dollar regulations

            f) General Rules of Section 83

g) Single Shareholder Practices

h) Deductibility of Interest

i) Single Premium Policies

j) Systematic Borrowing


6) Application of ERISA


7) Other Considerations

a) Choice of Product-

      b) Non-MEC


8) Types of Plans Currently Marketed

            a) The Practice Loan Approaches

b) The Pass-through Entity

            c) Other approaches

                        i) LLC approach

                        ii) Capital gains approach 


9) The Personal Loan Approach; The “Right” Approach

            a) The Mechanics

            b) Example


10) A/R Financing and Non-Physician Entities


11) Conclusion



© 2017 The Wealth Preservation Institute • St. Joseph , MI • (269) 216-9978