IRA's & Business Insurance

IRA

-all workers (even children) with earned income may fund until 70.5 years old -workers not covered by QRP may tax deduct their contribution -all workers may put up to $5500/year -workers 50+ may add additional $1000/year -Spouse may also create IRA and put $5500 per year into own IRA -IRA's included in estate at death

Buy/Sell Plan

-business entity buys life insurance to buy back stock of an owner who dies -heirs must sell at predetermined price -policy is owned and paid for by business -premiums are not tax deductible -DB is paid tax-free to employer -3rd party plans; insured, owner & co

Business Life Insurance

-can buy policies on selected employees -may discriminate and insure only one or a few employees -premiums are not deductible (non-qualified) -any kind of insurance can be used

Cross Purchase Plan

-each partner buys a policy on the other(s) - buy a policy on everyone except yourself EX) 3 partners *2= 6 policies -if partnership buys policy, it is an entity plan

Bonus Income

-given to important executives of company -exec buys and owns life insurance policy -bonus is taxable as wage increase to employee -deductible to business as expense -may discriminate -non-qualified plans -do not include everyone

Key Persons (employees)

-may be insured by their employer (w/ consent) -insurable interest must exist at time of sale, but not time of death -premiums not tax deductible to employer -DB is paid tax-free to employer (not insured) -company is owner, applicant, and beneficiary -can hire a replacement or retrain a new employee

Traditional IRA

-must start minimum distributions by April 1st of year after the year owner turns 70.5 (10% penalty tax for pre-59.5) -tax and 50% penalty if owner takes less than required RMD -10% penalty is waived for qualified distributions; post HS education, 1st time home buyers ($10K max), death & disability -at death, may be paid to beneficiary over their lifetime -if spouse is beneficiary, may be moved to their IRA and grow tax deferred until 70.5 -if no beneficiary is named, must be distributed by Dec 31st of 5th year after death

Roth IRA's

-not tax deductible -grow tax deferred -RMD's not required -IRA accounts paid to beneficiary/estate at owner's death -$5500/year if your income permits, plus $1000 catch-up after age 50 -own contributions can be withdrawn anytime w/o tax -qualified distributions may be made tax-free, if account is open 5 years and owner is 59.5, or death or disability or 1st time home

IRA Rollover

-one IRA per year can be rolled over to new IRA -20% withholding on the distribution -must be completed within 60 days or whole amount is taxed plus 10% pre-59.5 -"Direct Transfer" from trustee to trustee avoids 20% withholding and may be done an unlimited number of times per year -if owner receives distribution, 20% to IRS -Direct transfer, no 20%

Group Life Insurance

-provides term life insurance on employees -premiums paid by employer -personal beneficiary named on short enrollment form -31 day grace period -premiums are deductible to employer -laws of state where policy is delivered apply -one master policy given to employer -certificate with details of coverage (benefits, exclusions, how to file) is given to employee