Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Friday, August 31, 2018

More Life Insurance Coverage Can Help Protect Your IRA

IraEd Slott, an expert on IRAs, has pointed out that life insurance is not only "the single biggest benefit in the tax code"; it is also "the most cost effective way to protect a large IRA." Many people make the maximum contributions to their IRA plans, and it makes sense to buy additional permanent life insurance to provide additional tax benefits.

If you are in retirement and are required to make withdrawals from your assets to meet normal living expenses, using the cash value from your insurance policies is more cost-effective than withdrawing funds from taxable retirement funds. These types of withdrawals will have no impact on your tax bracket.

Another advantage of buying more life insurance is that it can give some leeway to a surviving spouse to convert a regular IRA into a Roth IRA and the spouse can use life insurance to fund a trust. The use of an IRA would have required minimum distribution requirements and tax implications. Life insurance proceeds are more flexible than other alternatives from a planning perspective,

See Elliot Raphaelson, More Life Insurance Coverage Can Help Protect Your IRA, Chicago Tribune, August 22, 2018.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.


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