An IRS summons just went out to an attorney fashioned as an expert in Captive Insurance Companies. Although it's not clear what the summons is for, physicians and advisors should be aware.
I just got my hands on a summons from the IRS that I wanted to make readers aware of it ASAP.
The summons was sent to Celia R. Clark, Esq. I want to point out that receiving a summons does not, in and up itself, mean that Clark or her firm(s) (affiliated or not) have done anything wrong. However, it’s something to pay attention to.
This urgent alert wasn’t sent to give you my opinion of Clark’s work; instead, it is to put everyone on notice that the summons went out.
Clark, it should be known, is an attorney who fashions herself as an expert in Captive Insurance Companies (CICs).
Why should you read the summons?
Because anytime the IRS is making a request of information that includes the client’s name, complete mailing address, etc., that’s significant.
It appears that the summons is also requesting information on various types of insurance coverages provided to clients who are paying premiums into a CIC. It's tough to say exactly what's going on just from reading the summons, but getting a summons is
not a good thing.
When a prominent CIC attorney receives such a request, it is important for advisors to be made aware of it — especially if you are working with Clark, if you are using CICs in general or even if you just have high-end clients who could benefit by using CICs.
Are CICs useful tools?
Notwithstanding the fact that Clark received a summons, CICs are one of the most useful risk management/wealth building tools available to profitable businesses. With CIC legislation in over 24 states, CICs should be around for years to come.
A CIC is a unique risk-management tool that provides coverage for currently uncovered liabilities. A medical practice pays premiums to a CIC owned by a doctor. With a good claim's history, significant wealth builds up in the CIC. When the doctor chooses, he or she can close down the CIC, and the tax on the accumulated assets is at the long-term capital gains tax rate instead of the ordinary income tax rate.
However, promoters who do not setup and administer their plans correctly eventually will be shut down, and their clients will have to deal with the consequences. So if you are going to use a CIC, make sure you use someone reputable.
Roccy DeFrancesco, JD, is author of
, and founder of The Wealth Preservation Institute. The
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