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FINANCIA L SITUATION
Having worked hard and prepared well for retirement, an IRA owner may want income from the
IRA, but also to provide for heirs. The IRA likely has considerable value. Since a traditional IRA is
subject to both estate and income taxes, over half of its value may be depleted by the time the heirs
receive any benefit. Wanting to ensure a guaranteed income and a guaranteed amount to the heirs,
the following is a means to achieve that goal.*
POSSIBLE SOLUTION
Consider the Wealth Security IRA. Supplemented with life insurance, the Wealth Security IRA
can transfer significantly more wealth to heirs than an IRA inherited at the owner’s death while
simultaneously guaranteeing the IRA owner a lifetime stream of income.
STRATEGY
Assuming the IRA owner is insurable, the IRA owner directs the purchase of a Single Premium
Immediate Annuity (SPIA) in the IRA, selecting fixed payments guaranteed for the life of the
owner.1 If the owner is over 70½ years old, the entire annual annuity payment is used to satisfy
the Required Minimum Distributions (RMDs). After paying income tax on each distribution,
he/she gifts (to the extent of annual exclusion/exemption amounts) to an Irrevocable Life Insurance
Trust (ILIT) the amount necessary to purchase a life insurance policy on the owner’s life to replace
the value of the IRA.2 If properly established, the life insurance proceeds will be free of estate and
income taxes and provide for the owner’s family upon the IRA owner’s death. The balance of the
SPIA payments will be used by the IRA owner for his/her personal use.
*All guarantees are based on the claims-paying ability of the issuing company.
Payments received from a fixed annuity remain constant and are guaranteed for the contractual period chosen. There are various SPIA
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payment options available, the fixed option with payments for life-only is one. Payments received from variable SPIAs fluctuate based
upon market factors. Clients should consult their advisors to determine the appropriate payment option for their specific circumstances.
If a life-only SPIA payment is chosen, the payments terminate at the death of the annuitant making the return a function of the
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actual life of the annuitant. Life insurance may be purchased to replace the value of the life-only SPIA.
HOW IT WORKS
1 IRA
SPIA is purchased within the IRA that will provide
the owner with a guaranteed income for life.
3 ILIT
ILIT purchases an insurance policy.
Not FDIC/NCUA insured. May lose value. No bank/credit union guarantee. Not a deposit. Not insured by any federal government entity.
5% growth rate used for all of owner’s assets including the IRA.
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42% estate tax and 35% income tax rates used for all of owner’s assets including the IRA.
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This material contains references to concepts that have significant legal, accounting and tax
implications. It is not intended as legal, accounting or tax advice. Clients should always consult with their
own attorney and/or tax advisor regarding the application of these concepts to any particular situation.
Sun Life Assurance Company of Canada and Sun Life Insurance and Annuity Company of New York
are members of the Insurance Marketplace Standards Association (IMSA).
Universal Life Insurance products are issued by Sun Life Assurance Company of Canada. In New York, Universal Life Insurance
products are issued by Sun Life Insurance and Annuity Company of New York.
All guarantees are based on the claims-paying ability of the issuing company, Sun Life Assurance Company of Canada, Sun Life
Assurance Company of Canada (U.S.), or in New York, Sun Life Insurance and Annuity Company of New York. All are members of
the Sun Life Financial group of companies.
©2007 Sun Life Assurance Company of Canada. All rights reserved. Sun Life Financial and the globe symbol are registered trademarks
of Sun Life Assurance Company of Canada.
XMSD 44/547
SLPC 17131 03/07
Exp. Date 06/10