I just reviewed a video where a life insurance agent—posing as a “wealth advisor”—told viewers they could roll over their 401(k) tax-free using Section 7702 and an Indexed Universal Life policy.
Worse, he recommended using policy loans to pay the taxes on the rollover. He claimed the client would “still earn interest” on the $80,000 in taxes—even as it was sent to the IRS. He promised:
- Guaranteed tax-free lifetime income
- A $1.9 million death benefit
- Long-term care protection
- No out-of-pocket tax payments
- A 2% floor and 17% cap
This is not a retirement plan. It’s a loan-based insurance trap with hidden risk and zero guarantees.
At RP Legal LLC, we’ve seen this strategy fail over and over. When it does, clients are left with lapsed policies, tax liabilities, and no retirement income at all.
7702 is not a loophole. It’s a tax definition for life insurance. The rest is just manufactured marketing—and we are holding it accountable.
If you were told your IUL would pay your taxes, give you tax-free income, and never lapse, let’s talk.