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Many Senior Citizens have a wide portfolio of assets with a primary concern leaving particular assets (those not expected to be needed for emergencies/income) to children and grandchildren. They are looking for a solution better than leaving money in CDs, Money Market Accounts and Fixed Annuities yielding interest rate returns hovering around 3 percent. They want to avoid paying taxes on CD and Money Market interest yields, especially when the sole purpose of these accounts is accumulation. Lastly, they realize that annuities will be taxed to their beneficiary at the beneficiary’s then tax bracket. The Solution is repositioning these low yielding assets with a Life only Immediate Annuity coupled with Guaranteed Death Benefit Life Insurance. Such repositioning maximizes wealth transfer by lessening income taxes and possibly estate taxes. Let’s consider a hypothetical situation. Ms. Smith is age 78 and has $70,000 in a non-qualified fixed annuity currently yielding 3%. She is concerned that her child, when the annuity is inherited, will have to pay Federal Income Taxes on the gain… approximately $55,000 taxable at her child’s current 35% tax bracket. If Ms. Smith’s child inherited the $70,000 fixed annuity today, the child would have an approximate FIT due of $19,250…that’s a $50,750 net inheritance! Twelve years from today, that same fixed annuity would be worth approximately $100,000 with her child facing close to a $30,000 FIT bill. The Solution is for Ms. Smith to reposition (by a 1035 exchange) her $70,000 to a Immediate Annuity (life only) coupled with the purchase of a $150,000 Guaranteed Death Benefit Universal Life policy. The immediate annuity would send Ms. Smith an approximate $640 check each and every month which is more than enough to cover the $498 life premium and any FIT* due (at her tax bracket). The advantages are that such repositioning hasn’t cost Ms. Smith any extra expense (in fact, she’ll be able to keep a small portion of the $640 each month) while her child will receive a FIT free $150,000 life insurance inheritance! * Ms. Smith’s FIT due, on the $640 monthly payout, is based Let’s consider the same hypothetical situation with the asset CDs. The $70,000, when repositioned, will avoid further FIT to be paid by Ms. Smith (her current FIT, on $70,000 earning 3%, is $315 annually…based on a 15% tax bracket). Twelve years from today, the $70,000 would be worth approximately $98,000 (after each year’s earned interest and associated paid FIT), which is quite short of the FIT free $150,000 life insurance inheritance. Roger Neal is your contact to learn more on |
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