Roth IRAs can be attractive planning devices. Though they are funded with after-tax dollars, all contributions and growth within Roth IRAs can be distributed income tax-free, provided distributions are made after the five-year holding period and the owner is 59- 1/2 years old. Although many high-income clients are unlikely to face lower taxes in retirement, Roth IRAs and their tax-free distributions can be attractive. 
Until recently, these IRAs were available only to lower income taxpayers who typically would not face high income taxes in retirement. Due to changes in the tax code, Roth IRAs are receiving wider attention. Many clients can now contribute to Roth 401(k) accounts and, upon separation from an employer, can roll those accounts into their own Roth IRAs. Beginning in 2010, taxpayers of all income levels can convert their traditional IRA accounts into Roth IRAs, without many of the prior restrictions.
While converting one's traditional IRA to a Roth IRA will accelerate income taxes, this may fit a client's long-term planning needs. For taxpayers who expect both their IRAs to grow and level or higher taxes in retirement, converting traditional IRAs and paying taxes today can be a long-term planning strategy for securing tax-free income in retirement (or to provide for beneficiaries). But clients must consider the income tax liability they will face on conversion and should consult a tax advisor before converting a traditional IRA.
Many higher income taxpayers who previously didn't qualify for Roth IRAs may now accelerate income by converting some or all of their traditional IRAs with an eye toward later tax-free distributions from the Roth IRAs during their retirement.
While many clients would like to convert their traditional IRAs to care for their spouse and future generations, they may wish to accelerate their income tax bill. For these clients, life insurance might provide a possible answer. 
How a life insurance strategy can work for Roth IRA conversions
During their lifetime, clients may live off their traditional IRA or other assets. Eventually, they will need to draw on their traditional IRAs as part of their required minimum distributions (RMDs). They can use some or all of their IRA distributions not needed for living expenses to fund a life insurance policy.
Remember, these traditional accounts would be subject to taxes sooner or later (through RMDs, at a Roth IRA conversion or when received by family members if there wasn't a Roth conversion). The life insurance death benefit can be earmarked to pay the income taxes due at the time of conversion (which, for these clients, would typically be at or near the client's death). Specifically:
? Clients would use their annual RMDs, or even pre-age 70 1/2 distributions, from their traditional IRA to fund a life insurance policy.
? The death benefit would be based on the estimated taxes that might be due at the client's death. That amount could be projected based on how the client expects the IRA to grow, using a reasonable rate of return, and adjusted for lifetime distributions.
? The client could also consider a gifting program in combination with holding the insurance outside the estate (e.g., trust) to increase estate tax savings.
Enhancing the Roth IRA conversion
Clients might not want to expend dollars to pay premiums, even if the dollars aim to achieve a long-term goal. If your client is worried about the loss of assets when paying the life insurance premium, they can add a return of premium rider.
Offered on a number of life insurance products, a ROPR can increase the death benefit by the amount of the annual premium. For example, if the death benefit is $2,000,000 and the annual premium is $100,000, the death benefit after year one would be $2,100,000. This allows a client's beneficiaries to receive both the death benefit and a return on the dollars spent–similar to a return of principal.
ROPR riders can also be enhanced. Some carriers allow clients to determine how much premium they want refunded (for example, from 10% to 100% of the premium dollars expended). Even more popular is an accumulation feature that enhances the death benefit by adding a crediting rate to the premiums returned in the death benefit. In this way, a client's beneficiaries can receive back the:
? Death benefit;
? Expended funds (a return of principal);
Mark Teitelbaum, JD, LL.M., CLU, ChFC, is vice president-advanced markets and Jennifer Tyler Wilhelmy is case design specialist-advanced markets at AXA Distributors, LLC, New York, N.Y. You may e-mail them at 
