Many
Wealthy people are art collectors.
If you are one, frame your insurance policy.
Hang it among your valued pieces of art.
Hang it among your valued pieces of art.
A treasured family heirloom.
They
have sufficient income at retirement and do not need proceeds from their 401K,
IRA or other retirement plans to live on yet they are required to take fully taxable RMD (Required
Minimum Distribution). Money that is not needed, but must taken or face stiff
penalty plus tax from the IRS.
These
families struggle with the idea of creating a huge IRA tax bomb for their
heirs.
Tax is due even if cash has to be raised during down market in a "Fire Sale".
When they have a number of children, the IRS may end up becoming
their biggest beneficiary.
Is there a better way?
A way for you to Maximize your IRA, creating tax free Legacy instead of a tax Time Bomb?
There might be (a legal way),
assuming you are: A. You are in reasonable health
B. You are willing to think outside the box
C. You do not mind doing the work it takes.
The solution involves using a tool many people object to and see as necessary evil. Life Insurance.
B. You are willing to think outside the box
C. You do not mind doing the work it takes.
The solution involves using a tool many people object to and see as necessary evil. Life Insurance.
Doubling
the value of a $4 million IRA.
A family like some of the families we serve who has
sufficient income to live on from pensions and social security and $4 Million
saved in IRA will generate $240,000 in proceeds and pay
roughly $100,000 in taxes on a distribution if they can get 6% return investing conservatively.
The family can use the $140,000 distribution as premium payment to buy $10 million life insurance on the parents to be placed in a foundation (trust) for the benefit of the
children.*
The example is using large numbers but the strategy works the same way with $400,000 IRA
The example is using large numbers but the strategy works the same way with $400,000 IRA
Key words. Not needing
income from IRA.
Let's
look at the alternative.
Investing the money in a traditional way.
Assuming you are able to grow $4 million IRA at 7% every year will double your IRA value in 10 years and your children inherit $5 million net (after taxes and RMDs) That is if you were successful in growing a $4 Million IRA over time investing diligently and having lady luck on your side,
Or...
You can take luck out of the equation and make sure you leave your children $14 million tax free.
$10 Million in guaranteed Income Tax free*Consult a tax advisor life insurance proceeds in addition to your taxable IRA proceeds.
This
strategy involves no stock market risk. Assuming you are able to grow $4 million IRA at 7% every year will double your IRA value in 10 years and your children inherit $5 million net (after taxes and RMDs) That is if you were successful in growing a $4 Million IRA over time investing diligently and having lady luck on your side,
Or...
You can take luck out of the equation and make sure you leave your children $14 million tax free.
$10 Million in guaranteed Income Tax free*Consult a tax advisor life insurance proceeds in addition to your taxable IRA proceeds.
When executed properly the bequest is left to heirs free of income taxes.* Consult a tax advisor and tax attorney.
This post only explain a concept and uses examples of premium amounts and proceeds.
This post only explain a concept and uses examples of premium amounts and proceeds.
Back in 2009 a family's
investment portfolio $15 million portfolio was reduced to $10 million due to poor market and economic conditions.
They made the decision to stick it out and wait for things to improve.
A decision was also made NOT to follow an advisor's recommendation to purchase life insurance.
After further market decline the family could not handle the stress and did what many panic stricken (undisciplined) investors do. They got out of market when their assets declined to $7.5 million.
They made the decision to stick it out and wait for things to improve.
A decision was also made NOT to follow an advisor's recommendation to purchase life insurance.
After further market decline the family could not handle the stress and did what many panic stricken (undisciplined) investors do. They got out of market when their assets declined to $7.5 million.
A life insurance policy was purchased so that that the insurance policy death benefit would be used to recover the "lost" portfolio value of $5 million.
The thought was that it will take many years to accomplish the same result by investing conservatively to minimize risk, if at all.
The thought was that it will take many years to accomplish the same result by investing conservatively to minimize risk, if at all.
This strategy employs the idea of using Human life value to help the family.
This
strategy can be used when someone is trying to "catch up" if starting saving later in
life or recovering from stock market losses.
Assuming you are investing $20,000 annually.
What do you hope your account value to be worth at age 65 or 70 at retirement?
Perhaps a combination of investing $10,000 and purchasing insurance with $10,000 works better.
What do you hope your account value to be worth at age 65 or 70 at retirement?
Perhaps a combination of investing $10,000 and purchasing insurance with $10,000 works better.
Let's
examine what happens by using insurance
A. Continue investing $10,000 a year.
What will you investment return be??? Unknown.
What will you investment return be??? Unknown.
B. Use the other $10,000 year to buy an insurance policy with $700,000 on a 70 year
old healthy parent.
Involves no financial burden on the parent.
Has a guaranteed value (Death Benefit) when needed.
Death Benefits available immediately.
Of course, you may want to start the moral and ethical conversation earlier.
Bonus points.
You also have proceeds of your invested money.
Has a guaranteed value (Death Benefit) when needed.
Death Benefits available immediately.
Of course, you may want to start the moral and ethical conversation earlier.
Bonus points.
You also have proceeds of your invested money.
Maximizing
your charitable bequest
Create a charitable endowment for wealthy families who are gifting
charitable organizations.
A wealthy family gifting money annually to create a $100,000 endowment for a charitable cause.
The family is willing to keep gifting annually. I would like to raise the question:
A wealthy family gifting money annually to create a $100,000 endowment for a charitable cause.
The family is willing to keep gifting annually. I would like to raise the question:
"Why is charity only important
when the donor is alive?"
Let's review a different option.
A $35,000 annual premium to fund a life insurance policy
owned by the charity will have a net cost to the donor of $20,000 in after tax Dollars (write off). ***
The
insurance proceeds can fund an Endowment that will pay $100,000 annually in
perpetuity.
Funding your inheritence with life insurance Live...
AND leave money for your family
Step number one:
Purchase a life insurance policy you can afford.
Step number two:
Do everything you want.
Spend all your money and leave an inheritance.
Purchase a life insurance policy you can afford.
Step number two:
Do everything you want.
Spend all your money and leave an inheritance.
If the market does well you'll have enough money to live and money left over to leave.
If market doesn't cooperate and ALL your
money (expected bequest to family) is spent.
Leave the insurance proceeds.
Life insurance
You DON'T (buy it because you) NEED it!
You
(buy it because you) WANT it!
* Consult a tax
planning professional such as a CPA and\or Tax attorney
**
Proceeds are back by the claim paying ability of a legal reserve life insurance
company
***
Consult a CPA and Tax Planning attorney The strategies examine are used for educational purposes only.
Not meant to promote the sale or purchase of any product or company
Not meant to promote the sale or purchase of any product or company
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