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The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers. Here’s the question of the day.
Question: Can an IRA own life insurance?
Here’s an excerpt from Internal Revenue Code Section 408:
For purposes of this section, the term “individual retirement account” means a trust created or organized in the United States for the exclusive benefit of an individual or his beneficiaries, but only if the written governing instrument creating the trust meets the following requirements:
(3) No part of the trust funds will be invested in life insurance contracts.
The rules do permit annuity-based IRAs to have a small, incidental death benefit component.
A client who has a pension-owned life policy must decide what to do with the contract prior to making any rollover into an IRA, since the IRA cannot own the policy.
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