A SECURE Act Defense Strategy

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Congress labeled it the SECURE Act, because it’s a better sell to the public. But, what Uncle Sam really wanted to do was make their spending programs more secure – hence, securing reelection.

For some background on the SECURE Act, you can learn more about it from my webinar.  It’s most important impact was the elimination of the stretch IRA.

By eliminating the stretch IRA and requiring distribution of inherited IRAs to most non-spouse beneficiaries within a ten-year period (my webinar has more on this aspect), the government can get their hands on your beneficiaries’ money sooner. 

What does all this mean?  Frankly, it raises the point that traditional IRAs and other tax-deferred retirement plans may no longer be the best option for leaving funds to beneficiaries.

IRA guru Ed Slott, a CPA and frequent PBS contributor, says many people should consider replacing their IRAs (a poor estate planning asset) with life insurance (an excellent estate-planning asset that has become even more valuable), since the single biggest benefit in the tax code is the income tax exemption for life insurance.   He calls life insurance the best, most cost effective yet amazingly underutilized strategy for protecting large retirement account balances. 

No wonder.  It’s not subject to any post-death SECURE Act limitations; proceeds generally flow income tax free, and it’s more flexible if utilizing a trust.  It can simulate the aspects of a stretch IRA without the tax complications of an IRA trust.

Interesting?  Worth learning about.  This strategy isn’t appropriate for everyone.  You should talk with an advisor about your specific situation – that happens best by completing a formal financial plan, preferably with a CFP® professional – to see if this, or maybe some other, strategy might be right for you.

Jim

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Jim Lorenzen, CFP®, AIF®

Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and An Accredited Investment Fiduciary® in his 21st year of private practice as Founding Principal of The Independent Financial Group, a fee-based registered investment advisor with clients located in New York, Florida, and California. He is also licensed for insurance as an independent agent under California license 0C00742.  IFG helps specializes in crafting wealth design strategies around life goals by using a proven planning process coupled with a cost-conscious objective and non-conflicted risk management philosophy.

Opinions expressed are those of the author.  The Independent Financial Group does not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.

Jim's picture
Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and An Accredited Investment Fiduciary® in his 21st year of private practice as Founding Principal of The Independent Financial Group, a fee-based registered investment advisor with clients located in New York, Florida, and California. He is also licensed for insurance as an independent agent under California license 0C00742.

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