Policy Owner Dies - No Will

[DHK]

I think Gordon Ramsay puts it rather perfectly. Language warning!

 

[myinsurebiz]

And THAT is exactly why I'm afraid for you and your clients.

You CANNOT fund an FIUL with qualified money. It ends up being a DISTRIBUTION from the qualified plan (taxable with possible penalties). Do you know enough of the tax code and enough of qualified plans to do this right and ethically? Do you know how to calculate a 72t? Do you know the terms, conditions to do this right - and how it would screw up your client if you do it wrong?

I don't know - that's why I have a lot to learn before doing it . . .

I was under the impression you could take the RMD's and roll them into a FIUL / GUL to fund them? I must have misunderstood him.

I'll figure it out and once I know the right way to do them - I'll be good at it. In my defense - I started out these recent conversations acknowledging that I have a lot to learn . . .

But it is exciting and challenges my brain . . .

 

[pfg1]

I don't know - that's why I have a lot to learn before doing it . . .

I was under the impression you could take the RMD's and roll them into a FIUL / GUL to fund them? I must have misunderstood him.

I'll figure it out and once I know the right way to do them - I'll be good at it. In my defense - I started out these recent conversations acknowledging that I have a lot to learn . . .

But it is exciting and challenges my brain . . .

Yes...you can take RMD's and do whatever you like with them. Its the qualified $ that you can't use to fund ins.

 

[somarco]

RMD's and do whatever you like with them. Its the qualified $ that you can't use to fund ins.

Not my area of expertise, but my understanding is that RMD only applies to qualified funds. Roth and other NQ funds may take distributions starting at 70.5 but are not required to do so.

Correct or not?

 

[scagnt83]

Yes, an IUL can be funded by RMDs. A Required Minimum Distribution starts as Qualified Funds. But once it is distributed out of the Qualified Account, it is then "after tax" Non Qualified money that is just sitting in your bank account to use.

HOWEVER, the catch is that if someone is taking RMDs, that means they are age 70 or older. (RMDs begin at age 70 1/2)

Obviously, UW is a HUGE issue in that concept. Not too many people age 70+ who are going to pass UW... using LFG or NA with their table shaving would help... but you still have a VERY limited market for this concept. Usually it is a healthy person who doesnt need or want the RMDs, and wants to maximize inheritance.

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Not my area of expertise, but my understanding is that RMD only applies to qualified funds. Roth and other NQ funds may take distributions starting at 70.5 but are not required to do so.

Correct or not?

That is correct Bob.

However, ROTHs do have a 5 year wait before you can take distributions penalty free (regardless of age). They also play by the same age based rule of having to be 59 1/2 to start distributions.

 

[Norwayguy]

And THAT is exactly why I'm afraid for you and your clients.

You CANNOT fund an FIUL with qualified money. It ends up being a DISTRIBUTION from the qualified plan (taxable with possible penalties). Do you know enough of the tax code and enough of qualified plans to do this right and ethically? Do you know how to calculate a 72t? Do you know the terms, conditions to do this right - and how it would screw up your client if you do it wrong?

My feeling is that this is above your pay grade and you'll be a compliance nightmare.

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You don't know what you don't know.

Your clients would be safer with you selling final expense and term life. It's a lot harder to screw those up and open yourself up to E&O claims, although it can still happen.

What's the worry he will be on the next big thing in 3 days....