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Old 12-18-2018, 07:34 PM
 
Location: plano
6,569 posts, read 8,103,218 times
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My IRA owns an AXA policy which includes a life insurance feature. My spouse is the beneficiary and likely to out live me. I assume the cash from the life insurance feature is paid to her outside her IRA. There is a contract with this AXA instrument that should I die is also inherited by my spouse but assume that is an inherited IRA element for her? I assume this is not uncommon and not subject to state rules so hopefully someone can guide me on this question
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Old 12-19-2018, 05:14 PM
 
Location: Florida
4,365 posts, read 3,700,708 times
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I am not familiar with life insurance in an IRA. Normally any payout from an IRA is subject to income tax. To avoid this you can inherit an IRA if it is done correctly but all the money stays in the IRA and is taxed when you withdraw. Maybe the IRA could be the beneficiary. If your post does not get a good answer you might want to check with the IRS. It will be interesting to see the answer.
What written documentation did the insurance company give you and what does it say?
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Old 12-19-2018, 06:32 PM
 
Location: plano
6,569 posts, read 8,103,218 times
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The primary product AXA is an annuity contract with a life insurance benefit as well before I convert the contract to annuity. I paid in a lump sum 11 years ago and began taking out payments under the contract a few years ago. I am delaying the annuity activation a few more years as the contract monthly payout is enough to meet my needs. It also allows me to keep the death benefit that I called a life insurance policy, because it act like one. My wife is the beneficiary of the death benefit which is in effect until I convert the contract to an annuity. I do not have anything addressing taxes. I too look forward to the responses.
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Old 12-20-2018, 04:57 AM
 
71,584 posts, read 71,730,589 times
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Why would one ever waste valuable ira space with an annuity . It never made sense to me ever putting a tax deferred product in an ira
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Old 12-20-2018, 07:59 AM
 
Location: plano
6,569 posts, read 8,103,218 times
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People make mistakes, I fired and sued that financial adviser and won.

But the question is not can I undo a past mistake, the question is will a death benefit payout to my survivor taxable or not if the contract that produces the payment in an IRA
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Old 12-20-2018, 10:42 AM
 
Location: Florida
4,365 posts, read 3,700,708 times
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Quote:
Originally Posted by Johnhw2 View Post
People make mistakes, I fired and sued that financial adviser and won.

But the question is not can I undo a past mistake, the question is will a death benefit payout to my survivor taxable or not if the contract that produces the payment in an IRA
Depending on the answer you might want to look into the possibility of moving the annuity to a ROTH. You would need to find a way to discount the value of the annuity. Maybe use the original costs?
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Old 12-20-2018, 09:25 PM
 
Location: 5,400 feet
2,623 posts, read 2,578,284 times
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Here are two sites that say an IRA cannot hold a life insurance policy.
https://www.investopedia.com/article...nvestments.asp
https://finance.zacks.com/can-life-i...ira-10439.html

Assuming these are correct, i suspect that any insurance proceeds paid out of your IRA, whether as annuity or death benefits, would be taxable.
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Old 12-21-2018, 01:23 AM
 
71,584 posts, read 71,730,589 times
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they are correct . you cannot hold life insurance in an ira .. there are a few exceptions but nothing that applies here . it is a big mistake getting involved in any insurance products in an ira and that includes qlacs which are allowed
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Old 12-21-2018, 12:44 PM
 
Location: plano
6,569 posts, read 8,103,218 times
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Thanks.

At least our tax rate is lower now than when working so higher tax rate then to create after tax funds then vs now

Last edited by Johnhw2; 12-21-2018 at 12:56 PM..
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