Worry Free Funds for Family Rodney and Tiffany Riches have substantial assets and are not counting on their IRA for retirement income. Although Rodney's IRA is quite substantial, he does not plan to take distributions unless absolutely necessary. His goal is to pay his own taxes on these funds as possible. He has considered a Roth IRA, but really doesn't want to pay the taxes to make the conversion at this point. He would like the IRA to become a fund that his wife and family could enjoy as added security after he dies. Minimize Taxes for Me and My Family "I like the tax benefits of a Roth IRA conversion for my family, but I don't want to pay the taxes now to convert. My IRA is 'extra' for our retirement, kind of added security to eliminate money worries for my wife and children."

Rodney & Tiffany Riches 65 Male 55 Female Children: 39 Male 37 Male 32 Female $1 million IRA @ 6% $10 million Other Assets est. Taxes @ 30% Rodney is age 65 and Tiffany is 55. They have three children ages 39, 37 and 22. Assets are net $10 million plus a million dollars in the IRA. Estimate their tax bracket to be approximately 30%.

Not counting on IRA for retirement Minimize income taxes while providing wife and family "extra" security Opposes taxes for Roth IRA conversion Rodney & Tiffany Riches 65 Male 55 Female Children: 39 Male 37 Male 32 Female $1 million IRA @ 6% $10 million Other Assets est. Taxes @ 30% Rodney’s objective is not to use his IRA for retirement income. And, he would like to minimize income taxes while providing his wife and family with the extra security of the IRA funds. He is opposed to the taxation should he convert his IRA to a Roth IRA at this time. However, he likes the fact that the Roth IRA accumulates tax-free, allows tax-free withdrawals, and doesn't require any minimum distributions.

Not counting on IRA for retirement Minimize income taxes while providing wife and family "extra" security Opposes taxes for Roth IRA conversion Rodney & Tiffany Riches 65 Male 55 Female Children: 39 Male 37 Male 32 Female $1 million IRA @ 6% $10 million Other Assets est. Taxes @ 30% The technique to be used will be QPDA’s Roth IRA Stretch. This is really a combination of several popular techniques: the stretch IRA which is a technique to spread distributions over multiple lifetimes to minimize the effects of taxes, and the Roth IRA conversion at death technique. Both of these techniques use life insurance as the facilitator making each possible. Tax-free life insurance death proceeds are used to pay the taxes that are due at the various deaths. QPDA - Roth IRA Stretch

Not counting on IRA for retirement Minimize income taxes while providing wife and family "extra" security Opposes taxes for Roth IRA conversion Rodney & Tiffany Riches 65 Male 55 Female Children: 39 Male 37 Male 32 Female $1 million IRA @ 6% $10 million Other Assets est. Taxes @ 30% The presentation has a simple resource to illustrate the concept of whether or not a spouse should convert the inherited IRA. If she does not convert to a Roth IRA, it will remain a traditional IRA and she must take at least the required minimum distributions, which are subject to income taxes, with the balance being used for herself or her family. If the spouse converts the IRA upon inheriting it, the income taxes for the conversion will be due, but all benefits will be tax-free from that point forward. The balance of the funds will not be subject to the traditional IRA rules. The difference is pay the taxes at the time of inheriting the IRA, or pay taxes on all distributions from the IRA and distributions are required. QPDA - Roth IRA Stretch Spouse inherits and converts

Not counting on IRA for retirement Minimize income taxes while providing wife and family "extra" security Opposes taxes for Roth IRA conversion Rodney & Tiffany Riches 65 Male 55 Female Children: 39 Male 37 Male 32 Female $1 million IRA @ 6% $10 million Other Assets est. Taxes @ 30% There is also a presentation page illustrating the best way to convert an IRA to a Roth IRA at death. If the IRA is converted, a portion will be subject to income taxes with the balance being available for the heirs. The smarter way is to use a small portion of the IRA to purchase life insurance on the IRA owner, so that at the same time the IRA is converted, the life insurance proceeds, which are received tax-free, can be used to pay the taxes. This leaves the whole IRA to benefit the family with its tax deferred accumulations and tax-free distributions. QPDA - Roth IRA Stretch Spouse inherits and converts Life insurance, provided by IRA, pays the taxes

Not counting on IRA for retirement Minimize income taxes while providing wife and family "extra" security Opposes taxes for Roth IRA conversion Rodney & Tiffany Riches 65 Male 55 Female Children: 39 Male 37 Male 32 Female $1 million IRA @ 6% $10 million Other Assets est. Taxes @ 30% Rodney's retirement with just RMDs and premiums The presentation shows a ledger of Rodney’s retirement distributions. Other than the premiums for the needed life insurance, only the required minimum distributions are taken. This minimizes the taxes on the IRA during his retirement, which accomplishes one of his objectives. QPDA - Roth IRA Stretch Spouse inherits and converts Life insurance, provided by IRA, pays the taxes

Not counting on IRA for retirement Minimize income taxes while providing wife and family "extra" security Opposes taxes for Roth IRA conversion Rodney & Tiffany Riches 65 Male 55 Female Children: 39 Male 37 Male 32 Female $1 million IRA @ 6% $10 million Other Assets est. Taxes @ 30% Rodney's retirement with just RMDs and premiums Tiffany's Roth IRA with no distributions The presentation shows Tiffany inheriting the IRA, adding the life insurance proceeds to her other assets, and paying the taxes for the Roth conversion from the other assets. She continues to pay the premiums on her life insurance policy, but through the other assets. Her new Roth IRA does not require distributions. Therefore she does not have to take any if she does not want to, leaving the balance for her family. QPDA - Roth IRA Stretch Spouse inherits and converts Life insurance, provided by IRA, pays the taxes

Not counting on IRA for retirement Minimize income taxes while providing wife and family "extra" security Opposes taxes for Roth IRA conversion Rodney & Tiffany Riches 65 Male 55 Female Children: 39 Male 37 Male 32 Female $1 million IRA @ 6% $10 million Other Assets est. Taxes @ 30% Rodney's retirement with just RMDs and premiums Tiffany's Roth IRA with no distributions One chart to show it all A one-page flowchart condenses all of this information to one simple sketch. Rodney takes minimum distributions during his retirement. At his death, Tiffany inherits the IRA and converts it to a Roth. Paying the taxes at conversion with Rodney's life insurance proceeds. She does not take distributions from the Roth IRA, letting it accumulate tax-free until her death. At that time, she stretches the benefits by leaving one-third to each of the children. Each child could take the lump sum or spread it out over their entire life expectancy. In order to do this, she needs almost $1 million to pay the appropriate taxes (as indicated in the red call-out). Again the life insurance paid from the IRA itself provides the tax-free funds to pay these taxes. When all is said and done, the million-dollar IRA provides the life insurance for the taxes and provides almost $6 million over the life of Rodney's wife and children. Providing the additional security in the form of tax-free funds for Rodney’s family. QPDA - Roth IRA Stretch Spouse inherits and converts Life insurance, provided by IRA, pays the taxes

Not counting on IRA for retirement Minimize income taxes while providing wife and family "extra" security Opposes taxes for Roth IRA conversion Rodney & Tiffany Riches 65 Male 55 Female Children: 39 Male 37 Male 32 Female $1 million IRA @ 6% $10 million Other Assets est. Taxes @ 30% Rodney's retirement with just RMDs and premiums Tiffany's Roth IRA with no distributions One chart to show it all Life insurance makes it possible The breakdown of the wealth transfer shows when the taxes are due and the life insurance that is available to pay them. QPDA - Roth IRA Stretch Spouse inherits and converts Life insurance, provided by IRA, pays the taxes

Not counting on IRA for retirement Minimize income taxes while providing wife and family "extra" security Opposes taxes for Roth IRA conversion Rodney & Tiffany Riches 65 Male 55 Female Children: 39 Male 37 Male 32 Female $1 million IRA @ 6% $10 million Other Assets est. Taxes @ 30% Rodney's retirement with just RMDs and premiums Tiffany's Roth IRA with no distributions One chart to show it all Life insurance makes it possible These techniques are made possible by preserving the IRA or Roth IRA assets. The risk-free way to assure this is the use of life insurance on the participant and the participant's spouse. Life insurance pays tax-free proceeds at exactly the time they are needed to prevent using the plan's assets and making the technique possible. QPDA - Roth IRA Stretch Spouse inherits and converts Life insurance, provided by IRA, pays the taxes

Rodney Provides Worry Free Funds for Family Rodney has accomplished his goals with your help. He minimized taxes during his retirement, he pays the taxes for the Roth conversion with tax-free insurance proceeds, Tiffany has a source of cash for her retirement with complete control--she could take it if she wanted it, any distributions would be tax-free, and she could leave any or all of it to her family, and they could spread the benefits and taxes over their lifetime. Wow! He really did provide "Worry Free Funds for His Family"! Takes just premiums and minimum distributions keeping taxes low Life insurance provides tax-free funds to pay Roth conversion taxes Tiffany has a source for tax-free distributions, but does not have to take any Life insurance provides for taxes at her death so the children get the funds Children spread taxes and income over a lifetime