Roth Conversion inside a VA with a Life Income Rider
Example fact pattern.
Investor opened an IRA inside a VA with an Income Rider that provides income for life ( no annuitization) with $100,000. The rider would generate an income off the greater of the account value or the principal.
The account value is now $50,000. The client qualifies for the conversion(AGI), he is over age 591/2 and will wait 5 years to begin the income stream. There are no surrender charges.
Question:
If the client converts to a Roth, does he pay tax on the account value ($50,000) or do you have to add the present value of the income for life rider?. I am aware of the temporary regs., re: a death benefit, but cannot find anything that discusses an income rider.
Wishful thinking would be to pay tax on the $50,000 and take the income stream off of the $100,000
Permalink Submitted by Al Fry on Mon, 2008-12-22 18:26
Taxation on FMV. Carrier should be able to calculate for you.