How to use Required Minimum Distributions (RMDs) to create a legacy.

Jerry Thomas Advanced Planning, IRA Stretch Planning, Life Insurance, Multi-Generational Strategy, Protective Life, Required Minimum Distributions - RMDs Leave a Comment

How to use your RMDs to create a larger estate for your kids and grand kids, to create a lifetime of giving.

So you have two clients who are now age 70 and they are asking you what they should do with their RMDs they have to start taking. Their current plan is to gift it to their children with hopes that some of it trickles down to their grand kids. Here is a way you can help them structure a plan that will create a larger estate and provide a lifetime of giving even when after they pass.

The Plan
By using the RMDs to fund a life insurance policy equal to the future projected value of the IRA, you can create two pools of money. The first pool, is the life insurance making the second generation the beneficiary. The second pool is the IRA where the third generation is the beneficiary. An additional option would be to include an IRA Trust, this would allow you to put specific rules on how the money can be spent.

What does this do to the estate?
By making the grandchildren the beneficiaries of the IRA, the future Required Minimum Distributions will be stretched out over a longer period of time. This will allow the money to grow for a longer period of time while experiencing the tax benefits of the IRA. The life insurance makes the second generation whole providing them with an asset of equal value.

Case Study
You have John and Mary are the grandparents and James is their only son. James (son) has a son named Greg (grandchild) Below shows a scenario of what a plan like this would look like and what the results would be using the below assumptions.

Not only can we create a graph showing you how this would all look below, we have the ability to show you this plan using Protective’s Advantage Choice GUL.

Click Here to see a full illustration.PDF


JLThomas - Multi-Generational IRA Strategy Case Study

JLThomas - Multi-Generational IRA Strategy

Instead of gifting the IRA to the second generation and losing some of the full potential tax advantages of the IRA, you will help your client create a legacy plan. This plan will continue to benefit the third generation well beyond the second generation has passed on. You will help your clients pass on more wealth by maximizing the tax advantages of an IRA and the power of a life insurance policy.

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