RMD to fund a life policy is a tax free distribution?
I had a prospect call me this morning and said that they heard somewhere that they could take their RMD and fund a life insurance policy with long term care benefit and the distribution would be tax free. I told them I did not think so, because I just don’t downright say no. But has something changed I am not aware of or is there a product out there that allows this?
Permalink Submitted by Alan - IRA critic on Mon, 2021-03-15 19:14
Possibly. The LTC component might be deductible, and that deduction if large enough to exceed the standard deduction might offset some of the RMD taxes. If this were to work, it would probably entail annual purchases and that may not be practical if they had to qualify anew each year. The prospect should get the specifics and then apply any deductible portions to their own tax return to determine if any RMD income or amount in excess of the RMD can be offset.