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My husband in the beneficiary of an IRA account that has a…

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My husband in the...

My husband in the beneficiary of an IRA account that has a life insurance rider. Can he roll the "IRA" portion of the account into an inherited IRA and take the "Life Insurance Portion" be tax-free? Thanks!

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

My father-in-law past away and left his IRA account (which is in annuities) to my husband. We are working to reduce the tax burden. We are looking at options and one thought was to roll over the IRA portion into an Inherited IRA account but take the Life Insurance portion of the account as a lump sum payout in order to pay bills from the estate. We were wondering if the life insurance portion would be tax free?

Accountant's Assistant: Is there anything else the Accountant should be aware of?

Such as?

Submitted: 4 months ago.Category: Tax
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Answered in 19 minutes by:
3/14/2018
Tax Professional: Lev, Tax Advisor replied 4 months ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,141
Experience: Taxes, Immigration, Labor Relations
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the "Life Insurance Portion" be tax-free - when paid to the IRA account.

But when distributions are taken out of IRA account - that distribution will be taxable.

Sorry if you expected differently.

You might want to avoid large distribution in any single year as that might push taxable income into higher brackets.

So you may want to watch total income (including distribution) and try to stay in lower brackets if possible and spread distributions over several years.

Please elaborate your options.

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Tax Professional: Lev, Tax Advisor replied 4 months ago

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If you still have any doubts, need clarification - please be sure to ask.

I am here to help you with all Social Security / Tax related issues.

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