Hello, I am a subscriber to your newsletter. I spoke to Glenda and she told me about your system for an independent agent like me to ask questions so that’s what I am about to do.

I am looking for advice on funding a 10 Pay Whole Life policy that has an LTC Rider attached to it using qualified money from a traditional IRA. The prospect has 5 IRA’s and wants to direct transfer one of his IRA’s worth $100,000 into a Deferred Annuity that will then fund the premium payments for 10 years using the RMD from the annuity. I know this can be done. However, my prospect is understanding from his agent that the premium coming out of this Qualified Annuity will reduce his total RMD amount that he has to pay from all of his IRA’s and therefore pay less taxes. So, for example, let’s say his life insurance premium is $12,000 annually which represents his RMD from that annuity. Now his total RMD’s from all of his IRA’s are $100,000; he is understanding that he would have to pay taxes on $88,000 not the $100,000. That doesn’t sound right because any distribution from an IRA is taxed unless the IRA is used as a charitable gift (QCD), where up to $100,000 can be excluded per year from a person’s taxable income.

FYI, the company that my prospect is talking to refers to a concept called “asset care”, providing the option to use a Deferred Annuity in funding a 10 Pay Whole Life with an Accelerated Death Benefit for qualifying Long Term Care expenses. My prospect seems to think that the “asset care” has something to do with not having to take taxes out of the RMD. I don’t believe that to be true. The organization that my prospect is working with is OneAmerican Financial Partners, with the policies written by State Life.

Please let me know your thoughts.

Len Carlson
Independent Agent
651-253-1943