Investing a Lump Sum

[gardnercr]

A relative recently lost a loved one who left her a tax free life insurance benefit.  The relative would like to invest that money in permanent portfolio in an account that itself would be tax free or at least deferred to ultimately leave to her heirs.  Has anyone in this forum had a similar experience and have recommendations.  The relative is retired and has good cash flow from other sources.

[Ad Orientem]

When discussing complicated legal issues, especially where one's mileage may vary from state to state, it's usually best to get expert advice. I suggest consulting a reputable attorney who specializes in tax and estate law.

[AgAuMoney]

A relative recently lost a loved one who left her a tax free life insurance benefit.  The relative would like to invest that money in permanent portfolio in an account that itself would be tax free or at least deferred to ultimately leave to her heirs.

The payment is tax free because it came from life insurance, but is not currently in an IRA or other similar tax shelter, correct?

If so, I know of no way in the U.S. to put an arbitrarily large amount into a tax advantaged account.  If your relative has earned income then an IRA could be opened and annual contributions to that IRA made to the lower of the legal limit or the amount of earned income.  That could continue for each year earned income is available to qualify.

If the intended heir(s) are young enough, perhaps prepaid college, Education IRA or state education savings plans might be an option.

Other than that, the "permanent portfolio" part of your request is pretty much going to limit the relative to a taxable brokerage account.  A permanent portfolio is fairly tax efficient, but there will be taxable income every year.

There is one other tax shelter option typically used only by the very wealthy.

That other option to tax shelter the money either/both as it grows and for a payout to the heirs would be to buy a life insurance policy.  A policy can be structured to be fully paid in about 7 years minimum to preserve the tax-free aspect and maximize the cash value.  Normally I don't think variable life is worth the added cost, but in this case it might allow sufficient investment options to more closely meet your "permanent portfolio" idea which might make it worthwhile to your relative.

The other recommendation to seek professional guidance is very good.  An estate attorney should be a fairly unbiased source (other than wanting to prepare various legal structures, starting with a will and various trusts, etc) unlike a financial planner / insurance salesman.  The initial "get to know each other" meeting should be free or fairly cheap, e.g. no more than $100-200 for an hour with the attorney or less to meet with an associate or assistant.

[Libertarian666]

The HBPP is highly tax-efficient in most cases. I would just put it in that and not worry about the taxes.