The IRS's Big Barn Strategy: IRAs and Life Insurance

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Welcome to finishing well brought to you by Cardinal guy� Certified financial planner belonged to Schild, best-selling author and financial planner helping families finish well over 40 years of finishing well will examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing Medicare IRA long-term care life insurance and investments and taxes. Now let's get started with finishing well oh well come to finishing well on a show the IRS's big barn strategy IRS's big barn strategy you know. I don't understand Hans that if if you have a lot of IRAs and you know ones that are not Roth IRAs, and you get to pay the taxes on the IRS's kind of hoping that you just take the minimum distribution and will get a lot more into that but I want to read this parable of Jesus talked about the big barn parable in a quest, the underlying spiritual principle is huge and will will cover that little bit, but I really want to talk about it when it comes this whole idea of IRA distribution so in Luke 1216 through 21 Jesus told this parable the ground of a certain rich man yielded abundant harvest and he thought to himself what shall I do, I have no place to store my crops and he said this is what I'll do, I'll tear down my barns and make bigger ones and then I'll store my surplus game green and I'll say to myself, you have plenty of grain laid up for many years.

Take life easy eat drink and be merry. But God said to them, you fool, this very night your life will be demanded from you, then I will get what you are prepared for yourself.

This is how it will be with whoever stores up things for themselves is not rich towards God. And so, as I start to see what's happened since have been talking with you constant certified financial planner hung Schild today and interestingly, today's topic has to be life insurance and you may wonder what the world is that have to do with the big barn strategy well as I watched in my own father strategy which I didn't know was strategy was to leave a large inheritance for all his kids and so is his IRAs grew and grew. He thought that oh Outlook I'll eat drink and be merry for them and end up given these huge IRAs to my kids, not realizing the tax implications of what that might've been at and so the IRS's kind of licking their chops the whole way is they see you know what will eventually be know that taxes are going to have to be paid by the next generation where little bit different strategy for the laid up more of a kingdom treasure that possibly you could be given. Part of that to the church what you would've given that the IRS and still leave your children the same size inheritance right now who absolutely mean it strategy that we talk about a lot with IRAs and we study a lot is really called the stretch IRA and its suits of people have money they have accumulated in their IRA or their 401(k) and they then pass away the money goes to the named beneficiary and then which is typically use your children and then your children receive the money as a beneficiary and most of them want to cash it in.

They needed so they're going to pay all the taxes it wants. Where is working to recommend a lot of different is is a little bit different strategy is to slowly empty that IRA over your lifetime, pay the taxes a little bit of the time which perhaps might get a lower rate for you even if it's at a somewhat higher rate. You got a remainder me whatever's left after taxes and Morgan suggested to use part of that to buy life insurance came we do this. I'm not can it just suggest everybody listening out there you go. Implement the strategies of this is not investment and financial planning advice for all of the phone.

This is just talking about one of the strategies that we recommend for people that are really somewhat according IRA money is that's that's the lion share their savings. They're doing everything they can to not withdraw from two to let it accumulate right now and I taxes and on that I can look back on it I can see my dad's office balances based on what needs stock market was doing the Time growing and growing and he thought what I'm doing something really really good for my kids and the strategy would seem to make sense except it really didn't yeah me. Taxes are a lot better off for receiving income a little bit of the time, year after year after year, which by the way, your kids could do once they receive this money in a beneficiary IRA we could help do it but I'm just getting most of them don't.

Because when they're given a choice between $5000 a year for 10 years or $50,000. Right now their intake of $50,000 right now and then 20,000 this category to the government so all were simply suggesting a lot of cases is backing up for those of you that are in your 60s and 70s is in you got money sitting in there.

You just taken the minimum here in the early part of this accumulation within side of an IRA and you really save because you want to give it to your kids and your your you're not pulling out or perhaps you want to use it to pay for long-term care and the bad news is is if you either die and pass it to your kids. All the taxes are to come do it wants or you withdraw it to pay for long-term care about you. Taxes are to be due to you-all. So a more appropriate strategy is to pull money out of it. Little bits maybe more than you're doing now. Go ahead and pay the taxes year after year after year after year and use of portion of what's left to buy life insurance and Tom is also with us today half that's conscious sidekick Tom Griffith affects Vic and Tom. You admits that the first thing a lot of people say when their 70s and 80s you know what you talk about life insurance. I can't buy life insurance, but you see Matt on the other side with some your client sure you we mean we get that a lot more people say oh I'm too sick to buy life insurance and they just think that is not something that they can qualify for so I look into it which I mean there are certain situations, the people the right they can't qualify for but a lot of people had this idea that they can't get it which is is not in fact sure. I mean Hans here we have a client.

He dealt with more closely but this guy, he came to us in and had some health issues and was really worried about his wife. Is it a pension that was gonna run out. When he died he didn't have a survivor option on the pension it was going to that income is going to end when he passed away. Go 77 years old and he had some difficulty with his heart managed well and in the modern times hard things are is serious as they were.

This is serious with her not as serious as they were 10 or 20 years ago. Type II diabetes under good control and a few other things and he just assumed it 77 years old. Life insurance is not an option. I think somebody told and we we managed to find them a policy in here. It was fairly expensive but expensive is relative.

He had enough money out of this pension to pay for any bottom-line peace in my the end so what I would say is is that if you hear something where you think that you would like to consider getting some life insurance is to understand that we have about 100 companies different companies at our disposal were independent and cardinal, and we we do this for people all over the country all the time and we do business with a lot of older folks and he certainly not the most difficult risk that we got an insured I can think of another gentleman. That's about the same age that actually got rejected by the same company. We put the first one with and what we did is we stack to final expense policies remember him yet and we yeah he he was just thrilled he didn't get as much insurance as he wanted but he got about 60,000 we got 35,001 and 25,000 and another in his wife is substantially younger than him. It was over another pension deal and so she can get a check for 60 grand when he passes away, the premiums affordable yet there are a lot of situations in our financial planning as it come up that seniors need some amount of life insurance and they need whole life because I mean sure you know Tom since 2070s got a one-year-old son. He doesn't need whole life. He needs term as if he was sold himself for we sold them whole life he wouldn't buy as much as he needed them he would. Tom needs in the millions of life insurance and is very affordable for him and term insurance at his age.

You know me, I'm just turning 61. I don't need as much life insurance. As Tom needs but I need whole life because I don't know whether I'm in a live to 70 A.D. 90 or hundred and there needs to be. I certainly want a certain amount of life insurance there for my family just to create estate liquidity. I mean, there's nothing like a check coming in to pay some of the bills right after person passes away as we talked about the beginning of the show that the IRS is essentially licking their chops about an event they're looking at those big barn if somebody passes away with all this money and IRAs etc. etc. but where they have never licked their chops rent talk about that in just a minute. But before that we can remind you that your listing to finishing well, a certified financial planner Hans Schaub brought you by cardinal guide.com and his book the complete cardinal guide for planning for living and retirements available to you. Today's tablets would be on the seven were stabbed, life insurance, I have to do is go there to cardinal guide.com and download that for absent free. The PDF is available or you can email Hans from the site and asking for the entire book in the course.

If you don't have a chance to hear all the show and be able to hear about us like the RS licking their chops when it comes your tax money then you want to turn in the second segment you can go back and listen to the podcast by just simply telling Siri in your iPhone as a theory, play the latest finishing well podcast or you can do the same thing with Alexa so the podcasts are available if you don't get to hear the entire show today. The course we do want to get into that which is fascinating. The IRS, licks their chops over the tax money that any get from IRAs what the place they have never licked their chops as a realized the advantage you know that the real benefits of life insurance to society even back.

Hans, you got it, life can you return from the 20s my to break them initially that have been my book and just the value the government uses the tax code to really state what's important to them and to to really try to manipulate us into doing things the way they want us to do it in a we want to make sure that you're aware that all this is available to any time in a you have a particular question obviously got this expertise of Tommy Hans is just a phone call away you go to cardinal guide.com and obviously email and text him whatever you want to do. They would love to talk to you and and again this is what they do their fiduciaries of the gonna write work and the benefit of the customer, not in their best interest list of the books available on Amazon as well. It's very inexpensive. If you want to tell Sue Yarbrough: in your office. It also is available in a lot of libraries across the country and specifically here in North Carolina and what is it like if you get the Kindle additional whole dollar 99 in the state nothing, but it's really wonderful and there's a book and a workbook get both of them apparently for 398 if there dollar 99 and at our website. It has a link to buy the book and get a ring or just send me a message saying listen to show signs.

Hans and I would love to take our show on the road to your church, Sunday school, Christian or civic group. Here's a chance for you to advance the kingdom through financial resources and leveraging Hans expertise and qualified charitable contributions veterans aid and attendance IRAs so security care and long-term care.

Just go to cardinal guide.com and contact to schedule a live recording of finishing well at your church Christian or civic group contact Tomczyk cardinal guide.com that's cardinal guide.com welcome back to finishing well today we are talking about the IRS's big barn scratch based on Jesus's parable where essentially the spiritual lesson. There is to be rich towards God and his work. Talk about life insurance today and we don't miss the fact that how many churches are going to be thankful for life insurance this very day. Do you think lots mean it. It's a wonderful thing to leave the church is either a partial or full beneficiary. One of the missions or something as the receiver of this to see ointment limit.

I'm learning something. I like it when I learned some so I could leave the church as a partial beneficiary in my life insurance absolutely have to have just one beneficiary will have any multiple and you we have to put percentages they all have to have up to hundred percent really yes or you can take the church in Fairmont 10% of my life insurance to go to church. I want 20% to go to Jesus labor like whatever the situation may be reminded not only to present to go to my son, and 20% to my daughter, 10% to my knees do it all time and you. We can even write separate policies. Sometimes people have some concern about somebody's seeing with the other one God, or that kind of thing will then which we can just write multiple policies that we do it all within one policy.

We could even do that within one IRA people are still stuck on. I still suggest you keep your beneficiaries right on your IRA even if this is some chance you and I can have a completely empty, even if you fall strategies right so this is a very godly thing to do and life insurance is a very you know it's it's it's it's got a bad rap probably earned by the life insurance industry but it really shouldn't have a bad rap. It's a wonderful product, and I mean unfortunately I know the case right this minute if somebody didn't have life insurance and the trying to figure out how to barium and you had that happen. Tom right there where you work and we had a coworker.

This is been several years back but she was young, about 36 and was looking at getting life insurance for her and the father of her children and things and then never to do that. The father first to his life insurance first and they had some difficulty.

There is something that get caught up in for whatever reason did he get finished out and in turn hers never got done either, so something was on her mind. She never finished while fast for a couple months because the doctor she gets diagnosed with cancer and three months later she had died and she's young with kids and had no life insurance and didn't have money to either pay for the very living, there is a go fund me account to help pay for the funeral limited discuss to speak that you never know when something's going to happen and it's it's never too early to just plan for that. The what if I mean the whole reason you buy life insurance is not to win financially or that somehow game the system to get more than you put in. It's really protect your family. If something happens that's unforeseen yeah this product mean the government has recognized what a great product. This is and how good it is for society.

So much so when the intent tax came out in like 1916 or 17. They right from the beginning excluded any life insurance, death benefits, is always there paid to a real person and I just in my book that we talked about earlier in the show the complete cardinal guide planning for living in retirement in on page 94 and 95. I have a copy of a 1926 tax return imitate something that's kinda cool about this guy was a bookkeeper. He was a long before go relative. One of my associates and eat.

He lived at the YMCA down in I believe Louisiana and the instructions on a 1926 tax return are part of the two-page return to the whole thing is two pages in the instructions are half of one page in the very first thing on there it says death proceeds from life insurance policies are income tax free there exempt from life insurance of this is been in the tax code from the beginning. Another thing that I've noticed is is that in my years I been in the life insurance business 43 years.

Most affluent to rich people think it loads life insurance so I mean what's what's really were a lot of folks might be turned off by this.

They've heard bad things about life insurance or life insurance companies somehow that message didn't get to the rich folk is that they just got this process. Tax advantages and this is in it. Your beneficiary procedure can be tax-free, but for you, yourself, you can use life insurance while you're alive, sounds and speaks to, and I think it's worth opening up that Candace delivered it is that clearly you know from my standpoint the tax code is pointing you towards protecting your family and they do that with benefits the whole life where the income is actually protected.

The cash value buildup inside of a life insurance policy is tax-deferred and if it ultimately is left in there and as part of the death benefit. It will be tax-free to your beneficiaries but you can borrow against it where you still live and not pay taxes on the loan and then wait to pay off the loan till you die and so that effectively makes it tax-free as well mean there are lots of tax strategies around using life insurance in there. They are not because the government wants to create loopholes for rich people to avoid paying taxes. There there because the government sees the value in this product and wants to have the tax code in such a way that encourages people to protect themselves and to protect the families where in the business of were fiduciaries to you when you hire us to do planning. It's our job to make the tax code work in the best possible way. Can you guess the simpler message if I could make it as simple as I know, to make it and I would not have known this and all these guys taught me everything I know about this, but if you have large amounts of IRA money that Fontenot not Roth IRA but the traditional IRA money in your current strategy is to take the minimum distribution because you want to leave as much as possible to your children.

I would urge you to get up with Hans or Tom or somebody not necessarily them but talk to somebody about a life and chart strategy because when I think about how much money got left on the table in my own family had they done a better strategy when it came to IRA money in them so you know, I know we talked about at the beginning the show, but I think it's worth repeating the Hans this is this is something where the IRS is literally licking their chops opening you do is that absolutely I mean I have said on earlier shows you need to have a strategy with your IRA is an observation of mine. Most middle income people. They have most of their wealth financial wealth in an IRA. They may own land, and they may own businesses and then some people have hold a lot of money outside of the narrow bench, talking about just people that are coming in as a rule, that our middle and upper middle income people are just when we sit down, put on paper. Let's say they got $800,000 to their name, usually 700,000 of it is in qualified accounts are an IRA or 401(k) that was Aragorn IRA or as a manager recently or it's in something where they've never paid taxes and they have a general date they've been accumulating it's gotten up like where to go now or in retirement. Now we gotta have a strategy to get the money and whether we just spend it's one thing we may pull it out. Pay the tax and then take the remainder into something else with that or invest or keep or put it somewhere else. We may not spend all of it. I would encourage you to go ahead and enjoy that spindle for years as people hoard money in their quicker to spend out of that hundred thousand dollars bucket because they know they don't have to pay taxes when they really should be doing the opposite. You need a strategy over your lifetime to reduce that IRA balance Quinn pay those taxes and then accumulate assets outside of an IRA or outside of the taxable IRA and life insurance is a is a is a great adolescent Italian. Another huge benefit that we having them talk about income for life insurance but I just experienced it so I know all about it. There's this thing called probate and now that is never ever warm that you throw out there is Carolina rig. Note probate is what happens when you pass away and all your money irate me know whatever.

If there's no beneficiaries on it. It goes into probate life insurance passes, as does other things of beneficiaries outside of probate and so are my brothers and sisters are currently waiting to get their portion of what might therefore in front inheriting for my father. It will be months before probate sober.

There's no way around. However, the life insurance in all that was a matter of days. You know that that that that's going to take place and that that's gonna happen and be there to help them in that time and they really needed it is is and I can think of other things as well. And yet, these days, you have a lot of second marriages and you have kids that yours mine and ours or yours and mine are. You know after people get up there in years there pretty much all our kids but you know it gets complicated when one of the spouses dies and then how does all the money gets distributed in one of their wills look like in life insurance is a wonderful way to pay off her pay the next generation and make sure everybody's included even if it's for different amounts just for what you just said.

It's all settled me think about all the wrangling they can go on and this is a quick probate with the Academy probate can go on for years and then if there's ever going to be any bickering between your family get started during that when everybody speculating what's going on and what was said life insurance. It's just paid out its overnight wonderful parents.

It's it's a product that really is.

You see, unfortunately, in the in the in a time now that obviously is difficult, but it's a time where you always talk about that, all of a sudden here's this infusion of money to all sorts of people at a time that's in a clinically needed and another point we want to be worried about money 43 years in the business at the pleasure of delivering a lot of life insurance text beneficiaries, face-to-face, and it it's truly a pleasure meeting just people I've had many people to start crying in place with really look at the check in and how quickly that it comes using that delete me to help build his next-generation up-and-coming that's that's part of what's going on and what we get a chance to partner with him and so were obviously bathed all the things in prayer. We always want to do that but we also want to remind you that you got a cargo guy.com if you want advice from Hans from Tom Griffith is his trusty sidekick Cardinal guy.com and we thank you for the list of the days on the phone. Thank you. We hope you enjoyed finishing well brought you by Cardinal guy.com visit Cardinal guy.com for free downloads of the show previous shows on topics such as Social Security, Medicare and IRAs, long-term care and life insurance, investments and taxes as well as constant best-selling book, the complete Cardinal guy to planning for and living in retirement and the workbook once again for dozens of free resources past shows when you get Hans book go to Cardinal guy.com if you have a question, comment or suggestion for future shows. Click on the finishing well radio show on the website and send us a word. Once again that's Cardinal guy.com Cardinal guy.com