Tax-free IRA conversion potential

As tax advisors we are always looking for ways to provide value added services.

One such strategy that we currently use, under the appropriate fact pattern, is “converting” taxable qualified money (i.e.: Traditional IRAs and 401(k) accounts) into potentially tax free money.

We are taking a distribution from a qualified account (at 59.5 to 69 years old) over 3 years and putting the distribution into a specially designed, high cash value life insurance policy which permits early withdrawals and potentially long term tax free distributions…depending on the long term S&P 500 Index performance. These early withdrawals are structured to pay the tax created on the 1099-R distribution, hence creating a "tax-free conversion".

For example, a $300,000 IRA would distribute $100,000 per year for 3 years.  The owner would be able to draw $20,000+ per year to cover the taxes caused by the 1099-R distribution. The $20,000+ would be available each of the 3 years of distributions.

After the 5th year of distributions/conversions, we could take some form of annual, tax-free distributions for $20,000+/- for life.

Does this seem like an interesting strategy?  Call me at 704-372-5520 or email me to learn more.