![Unlocking the Trapdoor of IRC Section 677(a)(3) Unlocking the Trapdoor of IRC Section 677(a)(3)](https://eu-images.contentstack.com/v3/assets/bltabaa95ef14172c61/bltfe98b4f942e81a39/673374a9130cc06993dca033/katzenberg-promo.jpg?width=1280&auto=webp&quality=95&format=jpg&disable=upscale)
Last year’s Tax Court decision in Webber v. Commissioner1 handed taxpayers a defeat in the area of private placement life insurance (PPLI). This first reported case on PPLI was littered with pages of facts revealing the taxpayer’s use of agents to indirectly control the trust-owned PPLI policy. A footnote in the decision regarding grantor trust status has led some life insurance companies and other observers to conclude that it’s better to use a non-grantor trust to own a PPLI product.2 Yet, most practitioners may pause for a moment because they’ve come to believe that an insurance trust is synonymous with grantor trust status. Internal Revenue Code Section 677(a)(3) controls grantor trust status as it applies to life insurance. A fresh ...
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