IRA Outcome, Accumulation Over Time
Facts
Lindey and Laurie, ages 74 and 70, are affluent. They have children and grandchildren whom they love and would like to help. Lindsey and Laurie have put $5 million into their retirement account that now requires distribution that they don't need or want.
The Problem
The distribution from the retirement account, per their CPA, is to start at $250,000 per year since Lindsey is now past age 73.5. This increases their tax posture by $80,000 per year, leaving them with $170,000 in income they don't need. Is there any way to make this somehow work for their heirs?
The Solution
Use the $170,000 after tax from the retirement account to buy a life insurance policy in the amount of $11 million in favor of the heirs, that is guaranteed for life.
The Outcome
The retirement income that had been unwanted, becomes $11 million to the heirs instead. Furthermore, life insurance proceeds are tax free.