Inherited IRA – Roth Conversions – Permanent LI
My mom inherited an IRA from her aunt. We know that she cannot convert this account to a Roth IRA.
From a tax efficiency standpoint, am I correct in thinking a great move would be to move money out of the inherited IRA and put it into permanent life insurance?
Is this the only tax efficient move my mom can make?
My mom fears rising tax rates in her lifetime. She knows she can pull money off permanent LI, tax-free.
And, she appreciates the idea of passing money down to beneficiaries, tax-free via LI.
Permalink Submitted by Alan - IRA critic on Tue, 2021-04-20 23:21
Perhaps. Her insurability is a question, as is possible premium surcharges in cases where she is eligible but is uprated, paying more for the same coverage including agent’s commission. How long does it take to receive a loan, if eligible? And what is her gross estate after including the life insurance payment upon her death? Possibly, life agents can provide illustrations comparing the options, but they probably assume you are the IRA owner subject to small RMDs per dollar balance compared to beneficiary RMDs, and now the 10 year rule. The 10 year rule already requires cashing out at a much higher rate, so likely life ins in this situation could be more compelling.