A TIMELY STRATEGY TO MAXIMIZE
AFTER-TAX INCOME
WHILE LEAVING MORE TO YOUR HEIRS
By: Norman Strell, Sr. Vice President
As investment income professionals, we are continually investigating
methods for maximizing after-tax income for our clients.
One particularly attractive strategy, developed in the insurance
industry, is called the "Annuity Arbitrage." Ideally suited
for investors aged 70 to 85, the Annuity Arbitrage can increase
an investor's income stream while reducing his/her estate tax liability.
How it works
By exchanging some portion of your lower-income producing assets
or other available cash for a Single Premium Immediate Annuity (SPIA),
you can secure a substantial guaranteed income for life. Part of
this additional income is then used to purchase a life insurance
policy, owned by your Irrevocable Life Insurance Trust (ILIT), to
replace the liquidated lower income asset.
The result
The result is higher net spendable income during your lifetime,
and a tax-free death benefit for your heirs.
After all is said and done, if you are able to qualify for a life
insurance policy, the Annuity Arbitrage approach will provide you
with a higher net after-tax return, a guaranteed lifetime income
stream, a lower estate tax bill and a greater amount to transfer
to your heirs.
Although the ideal age to qualify for these programs is 70 to 85,
being in less-than-perfect health does not necessarily preclude
you from this transaction. In fact, minor health conditions can
sometimes work in your favor.
This strategy is time sensitive. We are presenting it now because
the current interest-rate environment and the present cost of insurance
are ideal for this type of transaction.
If you would like to learn if an Annuity Arbitrage will work for
you, please contact
your FMSbonds representative or our E-Desk at 1-800-FMS-BOND (367-2663)
or email us at edesk@fmsbonds.com.
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