Abstract
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Required minimum distributions from retirement plans may pose tax problems for wealthy individuals. Affluent retirement plan owners with other sources of income may find their entire required minimum distribution taxed at the top tax rate. Also, if left in their estates and invested, the RMDs along with the returns on them may be subject to a 40 percent estate tax upon death of the individuals. One strategy for wealthy individuals to avoid estate tax is to gift the money from required minimum distributions from retirement accounts left after-tax to pay the premiums on life insurance in an irrevocable trust. The life insurance policies will not be part of the estate of the affluent senior citizens upon death, and the gifts and the death benefits from the policies (upon death of the givers) are not subject to estate tax on their estates.