Thursday, August 30, 2012

Brokerage General Agency - Annuity & Qualified Maximization Strategy

Brokerage General Agency discusses Annuity and Qualified Maximization Strategy

 Brokerage general agency Insurance Designers sales idea:

Age: 60 or older

Status: Nearing retirement or already retired. Contact our brokerage general agency for advice.

Concern: Would like to maximize the money left to their heirs. The money is not needed for income in retirement.

 An IRA or Annuity Max Strategy is an asset reposition play by using distributions from a qualified plan or annuity to fund a life insurance policy. Life insurance policies have the strategic advantage of a tax free death benefit which transfers a much larger legacy to your heirs.

Qualified retirement plans such as 401(k), traditional IRAs and Annuities are excellent vehicles for accumulation and to save for retirement because they can defer taxes for years and even decades. However, they're very poor vehicles for wealth transfer. When the time comes to begin withdrawing funds from IRA's, the money comes out and is taxable as ordinary income. The problem comes when you have an IRA and there is no need to actually pull income from it. In this scenario, it will sit and grow until the owner of the IRA passes away. These assets do indeed pass to a beneficiary (as opposed to probate).
When the beneficiary receives the inheritance, two things can happen.

1. They can either take the entire balance as current taxable income and it adds on to their existing earned income for income tax purposes.

2. They can stretch out their payments over their life expectancy which allows the IRA to continue growing while deferring the tax bill.

When we use life insurance to help offset this tax liability, it can replace the value of the IRA so that the inheritance becomes income tax free. Depending on the scenario, the life insurance proceeds may end up being several times the size of the original IRA asset.

Within the annuity, the client can choose to convert the deferred annuity into a SPIA ( Single Premium Immediate Annuity) and use the income payments or the client can decide not to annuitize the policy and take annual withdrawals to fund the life insurance policy.

If the client is worried about estate tax we can set up an ILIT to keep the life insurance outside of his/her estate. A brokerage general agency can help. 

Simply put, we are moving the client's heirs from a potential double taxation position into a tax free position while substantially increasing the amount of money received.
Brokerage general agency Insurance Designers
Brokerage general agency Insurance Designers