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May 2018

Examining Qualifying Longevity Annuity Contracts in 5 Easy Steps

What is a QLAC (Qualifying Longevity Annuity Contract)?
A QLAC is a type of fixed income annuity that has special attributes and is held in a retirement account. 

Let's examine qualifying for longevity annuity contracts in 5 steps:

1. RMD (required minimum distribution) exclusion. The fair market value of your QLAC is excluded from your RMD calcuations. What’s the benefit? You can keep a greater portion of your IRA (or other retirement account) intact longer while enhancing the income stream the annuity will provide in the future.

2. The distribution deadline. You don’t have to start taking distributions from your QLACs at age 70 1/2, but you can’t delay them indefinitely. QLAC distributions must begin no later than the first day of the month after you turn age 85.

3. Your investment threshold. You will be limited as to how much of your retirement savings you can invest in a QLAC. The limit will be the lesser of $130,000 or 25% of your applicable retirement account assets. The 25% limit applies on a per account basis except for IRAs, BUT the $130,000 is a cumulative limit for all QLACs in all retirement accounts. For IRAs, the 25% limit will apply to the prior year-end total of all IRAs (not including Roth IRAs). 

4. Facts to keep in mind. QLACs cannot be variable or equity-indexed annuity contracts, though insurance companies may offer contracts with cost-of-living adjustments. QLACs cannot offer any cash surrender value. So if you buy one, just be sure you won’t be needing that lump-sum of money anytime soon! 

5. The death benefit. QLACs can offer two death benefit options: a life annuity (the rules can vary depending on a number of factors) and a return-of-premium option. These, of course, are the potential death benefit options allowed by the tax code, but that doesn’t mean that every QLAC contract will offer all of these options.

Have questions or need more information on QLACs or your unique situation, click here to contact the office closest to you. 

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Is a Trusteed IRA a Good Strategy for You?

Leaving a legacy to your loved ones may be important to you, but when the time comes for your beneficiaries to receive your IRA assets, are you confident they will use their inheritance in a way that you’d want them to? There are options available for you to have varying levels of control over how your beneficiaries use your assets after you’ve passed. You may want to consider either a trusteed IRA or a trust, but how do you know which option is best for you?

We've developed this worksheet for you to use to help decide what level of control you would like to have. Click here to view it.

How much control do you want over beneficiaries after death? No control? Total control? Somewhere in between? 

Some things you will need to consider when making this decision: 

  • Different levels of creditor protection
  • Size of your IRA
  • The price you're willing to pay
  • Using an individual as Trustee
  • Trust tax returns for IRA
  • Holding RMDs after passing
  • Allowing trustee to act on your behalf before passing
  • Qualifications for IRS "See-Through" trust

And much much more. This worksheet will help you walk through and develop a strategy that matches your financial situation and needs. 

View the worksheet here. Prior to taking any action, you should consult with a qualified financial adviser.

If you have any questions or need further information, click here to contact the office nearest you so that we can help. 

 

 

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