Originally Posted by Brokerguy21
Ran into a pretty big prospect recently, we have has a few meetings. He is a CEO of a company, he wants to fund a 5 year custom whole life from a 401k, not a 72t. He is claiming he could put up to 56,000 a year from a 401k into whole life?
He wants to do the same for his wife and two kids
He said there is tax advantages to doing it this way. Any knowledge on this?
If you have never done this before you need to reach out to one of the advanced planning teams at a carrier such as LFG, Mass Mutual, Penn, ON, etc.
If you are not a registered rep or RIA then you need to check your state laws to make sure that Qualified Plans are not classified as a Registered Product.
If it is just a 401k then he will not be able to put the full $56k into life premiums... and actually the Qualified Plan limit for 2016 including catch up contributions is $59k, not $56k.
If he uses WL he can put up to 50% of contributions into premiums.
If he uses UL he can put up to 25% of contributions into premiums.
There are exceptions for aged money within the plan.
That means at most he can use $29,500 of his yearly contributions to purchase WL or $14,750 into a UL/IUL/VUL.
Even though you can get more WL premiums into the plan via yearly contributions, UL actually gives a much better tax advantage due to the IRS regulations. Without getting real deep into it, only the COI is taxable for UL which is much less than what will be taxed with WL.
There are different strategies for using life insurance within a qualified plan, so you need to pin down on what he wants to accomplish with this.
If he wants to put in more than those limits then he needs to add on a Defined Benefit Plan like a Cash Balance Plan.