How can investors make more money in life insurance than traditional profit sharing plans?
At age 60 and older, if you and your spouse do not need this money to retire on, distribute the $1 million IRA to yourself (pro rata up or down), pay the income tax and have approximately $650,000 in your hand to spend. Now transfer the $650,000 to an irrevocable trust or to your children. This will incur no gift taxes if you have not used your $1 million gift tax exemption. You then purchase a survivorship last-to-die life insurance policy on you and your spouse (or an individual policy if you are unmarried). Between the ages of 60 and 70, based on life expectancy, you can purchase approximately $15 million of insurance. Now it’s worth $15 million at your death. If you didn’t buy insurance and kept the $1 million in the IRA, even if the IRA increases to $10 million, you’re still only receiving $3 million because the government will take 70 percent in income tax and estate tax. Your IRA would have to increase to $50 million just to receive $15 million at your death after taxes. How doe
