skipkit -While I'm not sure of the details you were presented, the concept is generally sound. Annuity money will pass to your named beneficiaries as ordinary income (the gains, less the basis) just as you would be liable for taxes upon withdrawing. Life insurance proceeds, however, pass to beneficiaries without tax liablity (to the beneficiary - your estate may still have to settle with the IRS based upon its size...).Essentially, withdrawing funds from an annuity (and paying taxes as they are due), and using the money to pay premiums for a life insurance policy is often done by individuals with similar goals to yours. Because you said you had "substantial" amounts in annuities, I would suggest you calculate your estimated estate tax liablity to determine (1) how much insurance would be needed to help pay tax + leave a legacy for heirs, and (2) what might be the best ownership for the insurance policy (i.e. owned by an heir or a Irrevokable Life Insurance Trust). You might want help with this process - look for a qualified estate planner, financial planner, or tax attorney or CPA with experience in this area.Good luck & best wishes, PP
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