Making Every Dollar Count with Capital Preservation

The choices you make today will determine your legacy to those you care about. With careful planning and Capital Preservation, you can help ensure that you make every dollar count for you and your beneficiaries.

This strategy refers to transferring capital from one asset to another, letting you replace a “negative tax consequence” asset with an asset that provides a favorable after-tax result.
Taxes can dramatically shrink your legacy. But Capital Preservation can help stop the drain on your assets.

The Retirement Plan Tax Dilemma 

Traditional IRAs and qualified retirement plans — 401(k)s, profit sharing plans, etc. — are efficient accumulation vehicles. Untaxed dollars are used to fund the plan, and income taxes are deferred as long as the funds remain in the plan.

At death, these retirement plan accumulations may be subject to income tax. If you die with money in such a plan, income tax may be levied when funds are distributed to beneficiaries.

RMD’s Another Government Mandate

But that’s not all. After you reach age 701⁄2, annual dis-
tributions must also be taken from traditional IRAs and most qualified retirement plans. So, whether you actually need the money or not, the IRS requires that you take part of the account each year anyway. It’s called RMD — a required minimum distribution.

The Dilemma

You don’t need the money … but you must take the distribution that is specified by the IRS and pay current income taxes on it. If you don’t take the distribution… you will pay a 50 percent tax penalty. There is a way to use the required minimum distribution to help maximize the inheritance you leave to beneficiaries.

A Solution 

One solution could be to place your retirement dollars in one of the most tax-efficient vehicles for transferring property to beneficiaries — a life insurance policy. By using the distribution you’re required to take to purchase life insurance that benefits your designated beneficiaries, you can help maximize your legacy.


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Notes About Required Minimum Distributions ( RMD ) 

• This requirement mandates that you take a specified annual distribution after you reach age 701⁄2.
• Failure to take the required distribution — whether you need the income or not — means you will be taxed again, including a 50 percent penalty tax levied on any amount you were required to withdraw but did not.

Properly designed and funded, life insurance generally passes tax-free to beneficiaries — helping to preserve the legacy you intended for them to enjoy.


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