A tough one– Life Insurance proceeds be rolled over
A man purchases a longterm care policy with qualified IRA funds that converts to life insurance upon his death. The man dies with his trust as the policy’s beneficiary. The Trust has the clearly identifiable beneficiaries as his two adult children. Can the life insurance proceeds be rolled over into the deceased IRA and then split between the two children and put into beneficiary IRA’s for distributions to be made based on their individual life expectancies?
Permalink Submitted by Alan Spross on Mon, 2008-03-17 01:08
If this policy is purchased by the IRA, a prohibited transaction has occurred. Life insurance is prohibited per Sec 408(a)(3).
To purchase this policy the IRA would have to be distributed in a taxable transaction, and the policy purchased with the after tax funds remaining.