All Forum Posts by: Jeff Nash

If you are looking for more safety and preservation of principal, we recommend a cash platform called Flourish (owned by Mass Mutual) to our clients.  The current yield is 5% which is variable.  It’s been 5% for the better part of the last year.  It’s flexible with no restrictions to move money between your other bank and investment accounts.  

As far as other options that might have higher yield and returns, structured notes and trust deed notes might be worth a look.  I have not quantified your risk tolerance, but from what you stated it looks like you are not particularly aggressive and might be moderate or slightly below.  Notes cover the entire risk spectrum and can be appropriate depending on the amount allocated and terms. There are greater risks relative to an option like Flourish which is strictly capital preservation, and temporary illiquidity is one of the drawbacks, but if you are selective and do your due diligence I think you can achieve the desired result.    

You have a lot of information packed in here, and a more aggressive retirement age goal.  Your fact pattern appears very encouraging and positive.  Your biggest risk if you execute the plan will be running out of money in retirement, either due to natural longevity and/or later health issues draining your resources.  That is an inherent risk to everyone, but especially early retirees.  For the property analysis and decisions I would chat with someone like @Denver McClure.  

I am a CPA, licensed agent, and have a lending background and think I can speak to the various parts of your question.  MM has a number of different versions of whole life policies, and the current interest rate ranges from 5.0% to 5.72% depending on the product.  The current dividend scale is about 6%, but when that kicks in depends on the cash value. Dividends usually begin in years 2 or 3 of the policy and your illustration should show this (guaranteed and non-guaranteed views).  You can use the cash value in the policy as a source of funds for financing, and it is an asset and liquid through withdrawals or loan by borrowing against the cash value.  The latter of these scenarios is usually preferable.  Many clients have put the IBC or similar concept to use, but how effective it is and whether it's right for you depends on several factors as there are pros and cons to everything.  Hope this helps.   

Look at KKOS Lawyers.  I work with them frequently and they have a great team.  They work with real estate professionals and business owners.  

@Bob Willis I think the answer is, it depends.  Typical CPA answer, but things are often grey.  I would first run the fact pattern by your custodian and see if they will conclude on it, but if they punt I can refer you to a solid ERISA attorney that I collaborate with in situations that I myself am not 100% certain of.  None of us here on BP has all of the facts and reviewed any documents so I would proceed with caution on this one and get complete assurance.   

I think the risk of you having a prohibited transaction (extension of credit and not using a nonrecourse loan) is the real issue and not necessarily UBIT.  If this is the case, it would be considered a deemed distribution of your account which could result in adverse tax consequences. 

Just a few comments - if he withdraws or takes the distribution from the 401k it is taxable as ordinary income and not sure what impact that would have on his tax situation. Perhaps he could implement some other tax strategy to offset the distribution. Moving funds to an IRA will not help because you can't take a loan from an IRA.

I would look at other lending options to bridge the gap in time as well to avoid potential delays in your operating plans.  

None of the large mainstream custodians will include a loan option and they do not allow for true self-direction in regards to the way it is understood in BP (i.e.- invest in real estate and other alternatives).  The have very basic solo 401K options with more limited features that are not customizable.  That might work just fine for many people that just want to stick with traditional investment options and have a simple plan design. @Brett Synicky makes some good points.

@Denver McClure would be a great candidate for this service.  

You will need an attorney and a tax professional to assist with a situation like this.  There would be too much back and forth to address what additional information is needed here to help you accomplish your goal.