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Palma Financial Services Proactive Tax Approach

Life Insurance as Alternative to IRA

An Individual Retirement Account (IRA) is a tried and true savings vehicle for people seeking financial security in the Autumn of their years. In a perfect world the maximum amount is added tax-free every year and if invested wisely grows tax-free as well. Then beginning at age 70 1/2 distributions are taken yearly, taxes are paid, and everyone enjoys the travel and leisure of retirement.

Unfortunately as we all all know, we don’t live in a perfect world. Suppose at age 71, the owner of the IRA dies unexpectedly. Let’s say there’s $400k in the IRA that will now be passed on to beneficiaries. Unlike real estate or regular stock account transfers, an IRA is taxable. All the deposits and gains are now subject to income tax when received by the beneficiary. At a conservative 35% tax rate thats $140k for the IRS and only $260k for the heirs. A tax bill like that will shock most beneficiaries and many will be forced to sell securities or other assets to pay for it.

It is surely not the intent of the IRA owner to pass on a highly taxable vehicle to his or her heirs. If only he or she knew there was an alternative – life insurance. Yes, life insurance. If you have the forethought to know that you will be passing on your IRA to your heirs when you die then a specially tailored life insurance policy will leave them with more money than an IRA, bottom line.

A Life Insurance policy has the following additional benefits:

1. No funding limitation
2. No early withdrawal penalties
3. Tax deferral, safety, and immediate liquidation
4. The entire tax-sheltered accumulation passes income tax free to the beneficiary.

The time to act is now. The earliest point in time that you can enter a life insurance contract is going to be the lowest cost and highest return in the long-run for total family wealth in the end.

Please call Palma Financial Services, Inc for a no-pressure, informative, free consultation. Ask us about Life Insurance as an alternative to an IRA, or if you already have an IRA, how to most efficiently transfer the balance from an IRA to a life insurance policy. We are here to protect and serve your financial security.

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