Celebrating 10 years! 2007-2017

Structuring a sale

Client has an asset that he cannot sell because it is INALIE cantimaginenocountry04/13/18
First of all, I don't think you can value a pension by analo guyingorillasuit04/13/18
actually, the buyer is buying a f-cked up version of a remai dingbat04/13/18
this sounds overcomplicated. What you're really proposing i dingbat04/13/18
So your theory is client uses his pension to pay off the sec lilgub04/13/18
Client is a Natural person, right? How about pricing out jackofspeed04/13/18
how about your client sells a life-long annuity based on the dingbat04/13/18
The client cannot sell the pension. I mean in theory he can cantimaginenocountry04/14/18
How is the value of the pension relevant to this transaction guyingorillasuit04/14/18
I worry about the fact that cantimagine is an attorney givin dingbat04/14/18
I am just using imaginary #s to illustrate. The #s can be ad cantimaginenocountry04/15/18
no, it isn't. you cannot sell a pension. You can sell or m dingbat04/16/18
cantimaginenocountry (Apr 13, 2018 - 2:44 pm)

Client has an asset that he cannot sell because it is INALIENABLE namely a db pension that cannot be sold, It is akin to social security. It pays him $920 a month or 11k a year. This has a PDV value of 400k or so. You would need 400k with a 10 treasury yielding 2.8% to have a return of 11k a year or so. So pension is worth ~ 4ook

So this transaction is proposed:

Client wants to sell pension for 300k lump sum. He cannot do this because pension cannot be sold. So sells a 400k security interest in house (or other property) for 300k while keeping the pension. Client collects on pension until his death, gets 300k today as well and the the buyer has bought a 400k interest for 300k. Thoughts all?

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guyingorillasuit (Apr 13, 2018 - 5:54 pm)

First of all, I don't think you can value a pension by analogizing to a T-bill and without referencing acturial tables. Second, the proposed transaction makes zero sense to the buyer. I don't understand how the buyer benefits. The buyer gets $100k upon death of your client, the time of which is uncertain, and after having to deal with a bunch of hassle, such as possible probate. Your client is not selling his pension; he is arbitraging against his life expenctancy.

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dingbat (Apr 13, 2018 - 9:55 pm)

actually, the buyer is buying a f-cked up version of a remainder interest in the property (except, unlike an actual remainder interest, it's a security interest, which involves a bunch of hassle)

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dingbat (Apr 13, 2018 - 9:54 pm)

this sounds overcomplicated. What you're really proposing is to create a life estate for the client and sell the remainder interest for $300k.

Does your client have a buyer in mind?

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lilgub (Apr 13, 2018 - 4:43 pm)

So your theory is client uses his pension to pay off the security interest?

If your client gets hit by a bus tmmrw, it sounds like his estate is SOL (assuming the 300K payment is gone, obviously). I think that's the real risk, right?

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jackofspeed (Apr 13, 2018 - 5:03 pm)

Client is a Natural person, right?

How about pricing out an insurance policy to payoff the security?

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dingbat (Apr 13, 2018 - 9:53 pm)

how about your client sells a life-long annuity based on the life of the client to the buyer for $300k?

Every month when your client collects his/her pension, the client then has to pay the buyer that same amount.

Of course, the buyer would need to be a complete idiot, because there is no practical remedy if your client decides to stop paying

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cantimaginenocountry (Apr 14, 2018 - 2:05 pm)

The client cannot sell the pension. I mean in theory he can but the Pension plan settlor will not enforce the sale so ergo no real sale. So the client will sell: 400k of property (security interest) for 300k in cash while of course keeping the pension he would have sold. Of course he can do whatever he wants with the proceeds. Pay off the security interest etc. Of course if he lives until 100 he will have made out like a bandit because he will collect way more than to pay back the 100k. He dies tomorrow and he is a net loser of course or his estate is net loser. Does this make sense?

In lieu of selling an unselleable asset he sells a salleable asset for FMV minus the value of the pension.

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guyingorillasuit (Apr 14, 2018 - 3:23 pm)

How is the value of the pension relevant to this transaction? The buyer is buying a $400k interest which vests after seller's death. What matters to the buyer is not the pension, but how soon the seller will die. Let us assume the pension is worth $10 billion. How does that matter to the buyer one bit? If the seller is 65 and in good health, the buyer just made a bad deal. If the seller is 98, with multiple organ failures, and in hospice care, the buyer made a good deal.

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dingbat (Apr 14, 2018 - 5:27 pm)

I worry about the fact that cantimagine is an attorney giving clients legal advice.
I've seen the damage that comes from such clueless attorneys trying to be clever.

s/he should stay in his/her lane. If we need to explain such simple concepts, it won't end well.

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cantimaginenocountry (Apr 15, 2018 - 6:32 pm)

I am just using imaginary #s to illustrate. The #s can be adjusted to make it work. A way to make an unreliable asset sellable.

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dingbat (Apr 16, 2018 - 5:59 pm)

no, it isn't. you cannot sell a pension. You can sell or mortgage other assets, which can provide the cash necessary. The bigger issue for me is that you cannot seem to grasp something so basic. You're trying to make something very simple very complicated.

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