IRA/Pension Maximization
Over the years, you saved through an IRA or other qualified pension plan designed to provide you with income in retirement. You may have found you will not need these assets to produce retirement income for yourself. If you leave these assets to your heirs, they will pay income taxes (at their tax bracket) on the entire tax deferred assets in the account. You may want to investigate if there is a better way to pass these assets on to your heirs.
Solution:
You can reposition the IRA assets into a life insurance policy. You will have to pay taxes when you withdraw money from the IRA, but it will be at your lower tax bracket and not your children’s. Even after paying the income taxes, the net remaining assets will generate much more money to your children via the life insurance policy. And all the money received will be tax free.
Example:
John (age 70) and Mary (age 65) Client have an IRA which now has a value of $1,000,000. If left to the children, the IRA would be worth $640,000 after taxes (assuming a combined federal and state tax bracket of 36%). They could liquidate the IRA (if not needed for income), pay the income taxes of $360,000 and invest the remaining $640,000 into a last to die life insurance policy on themselves. At their death, the children would now receive $2,500,000 - tax free.
Additional Note:
If the same IRA above existed in a $10,000,000 estate, the remaining amount left to the children after income and estate taxes would only be about $140,000 out of the original $1,000,000. The insurance program that would generate $2,500,000 tax free is an extremely much more viable alternative, especially in this scenario.
Contact us for a complementary, no obligation analysis of your personal situation and a proposal on how best to implement this program to maximize the value of your annuities for your heirs should it be appropriate for your estate planning needs.
