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Old 05-26-2014, 05:44 PM
 
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I was listening to this video (thanks Mathjack) and he is saying that life insurance is tax exempt. He is saying move money from taxable IRA into life insurance and to think of it as investing. I've never looked into life insurance. Is anyone doing this? The premiums are not tax deductible right? If anyone is doing this can they explain it?

Thanks
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Old 05-26-2014, 09:20 PM
jw2
 
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Quote:
Originally Posted by petch751 View Post
I was listening to this video (thanks Mathjack) and he is saying that life insurance is tax exempt. He is saying move money from taxable IRA into life insurance and to think of it as investing. I've never looked into life insurance. Is anyone doing this? The premiums are not tax deductible right? If anyone is doing this can they explain it?

Thanks
A life insurance death benefit is not considered income so it is, in effect, income tax exempt but it may be considered as part of the estate in calculating estate and/or inheritance tax.

The premiums are not generally tax deductible.
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Old 05-27-2014, 01:30 AM
 
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you are talking about ed slott's strategy.

yes the life insurance is tax free but the premiums do get taxed when they are taken out of the ira to make the payment.

but the policy is leveraged so you take out less then you get making it a very good strategy.

that is not to say that you could not do the life insurance ploy and over the years have your money grow enough in the ira to pay the taxes and equal the amount of the insurance, it sure is possible.

but the gamble is a run of poor markets make make that uncertain where the life insurance is a given. you can also pass the life insurance outside your estate if you wanted without it being counted towards any state estate taxes if you make the kids the owner..

for those not aware to what the op is referring to:

if i leave my wife a million dollar ira she owes taxes eventuially on the withdrawals and in fact we don't even know how much she gets to keep.

but if i buy a single premium life policy for 1 million with the ira money she gets 1 million tax free. the policy would cost less than that and whatever is left i can leave to the kids. they get to pay the taxes stretched out over their life time or better yet mmake it into a stretch ira by leaving it to grandkids streching taxes out over generations.

Last edited by mathjak107; 05-27-2014 at 02:42 AM..
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Old 05-27-2014, 08:09 AM
 
Location: Northern panhandle WV
3,007 posts, read 2,179,571 times
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Quote:
Originally Posted by jw2 View Post
A life insurance death benefit is not considered income so it is, in effect, income tax exempt but it may be considered as part of the estate in calculating estate and/or inheritance tax.

The premiums are not generally tax deductible.
That would depend on who Owns the policy. If the deceased owned it then it would be part of the estate, if the spouse, or beneficiary owns it then it would not be part of the deceased estate.
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