QLACs – Avoiding Taxes For A Little Longer
Using someone else’s money costs money. It’s called paying interest on a loan. But it’s especially irksome when you have to pay someone to use your own money. It’s called income taxation.
But sometimes the government at least allows you to defer the levy on taxable income. The most common occasion is when money is saved in qualified retirement plans.
Consider the power and efficiency:
- There is no current taxation on either contributions or earnings…
- Allowing for maximum compounding of the account balance…
- With the possibility that taxation may ultimately occur in lower brackets.
But the deferral period ends when taxpayers reach (in most cases) age 73 and must begin taking required minimum distributions (RMDs) from their plan.
But what if a client doesn’t need the RMDs and would like to extend the tax deferral period?
Since 2014 the government has allowed for the extended deferral of both the taxation and required distributions of up to (currently) $210,000 of your client’s qualified accounts until as late as age 85 by repositioning the funds in a qualified longevity annuity contract (QLAC)!
We will help you and your client:
- Determine how long to extend deferral estimating the tax impact on the larger distributions required at a later age.
- Determine how much should be deferred based on current or eventual need for RMDs.
- Structure deferral advantageously if RMDs have already begun.
- Design a proper death benefit option in the QLAC if your client dies prior to distributions.
- Select the right product to meet the QLAC goals chosen, as product design and flexibility vary greatly from carrier to carrier!
Call now concerning your clients interested in greater tax deferral.
For What It’s Worth: Albert Einstein supposedly said, “The most powerful force in the Universe is compound interest.” Regarding the reliability of that attribution consider that the often-quoted Yankee-great, Yogi Berra, commented, “I really didn’t say everything I said.”