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November 10, 2011


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Item 10
If you leave your IRA to a young person such as a child, or preferably a grandchild, it becomes what is known as a Stretch-IRA. The young person will inherit the IRA and will have to make a mandatory distribution from it every year, with the size of the distribution based upon their life expectancy. The distribution will be taxable income. The younger the person is then the longer the IRA will last. This will increase their tax liability but also increase their income much more so it's a good way to STRETCH out the time it takes to deplete the IRA while providing income to the beneficiary for many years into the future, while making the government wait longer for their money, and allowing the IRA to keep growing after your death.

You also don't have to leave the whole IRA to one person, just make sure the percentages that are left to each beneficiary add up to 100%.

I like your simple equation for life insurance. Judging by it, we're covered should anything happen to my husband or myself.

We have Northwestern whole life insurance “key man” policies through a business that we own. It is a large expense now but in about 10 years it will pay for itself with its dividends. We view the cash value as our emergency fund and chose this vehicle because we were advised that our policy is judgment proof and bankruptcy proof in our state. I feel like it’s a good investment, but there are so many critics of whole life insurance that I sometimes doubt our decision.

Great primer on life insurance. Not many people speak about #7, 9 and 11. Thanks for including the estate benefits of life insurance.

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