Guarding Against Massive Tax Hits When Passing Retirement Savings To Heirs

You save and crimp for years to build up a retirement nest egg. It would be a tragedy to have the government get it all when you pass. Well, that is exactly what happens in most cases. 

You’ve worked your rear end off for the last 50 years. It is now time to retire. You are 71 and ready to enjoy the golden years. You have over a million dollars socked away in retirement accounts to fund your golden years. The first year is great, but you suffer a massive heart attack and die in year two. Depending on your overall financial situation, the federal and state governments will come in and take up to 70 percent of the money you try to leave to your heirs. Yes, the vast majority of your hard earned wages have gone poof!

Is there anything you can do to fight this inevitability? Yes! One strategy we use with clients is to buy insurance to guard against this eventuality. Here is how it works. The policy is purchased on the life of the person listed on the retirement accounts. A valuation is done for the accounts regarding the expected taxation. The policy is purchased in this amount. Should you pass away during the term in question, the policy kicks in the funds to pay the tax and your hard earned money goes to the intended heirs instead of the politicians in Washington, D.C., and your state government. 

Ah, but there is an extra twist with this strategy that makes it even better. You can actually pay for the policy out of your retirement vehicle if it is a 401k. This effectively means that you gain the huge advantage of accounting for the taxes without losing any after tax dollars. Unfortunately, policies cannot be purchased with IRA funds, although the situation may change given the rather substantive changes being made to tax law at the moment. 

Contact us today at (800) 341-5433 or via this contact form to learn more about this approach and other strategies that can keep your money in your hands and out of Uncle Sam’s.