Just want to add to this statement "About the only way to get assets from an insurance policy to an IRA is to cash in the policy and contribute the money to the account. However, you'll have to treat the money as taxable income". That is true, but only the net gain on the life insurance policy is income... if you've paid into the policy and the cash value is less than your cost base, you've realized a loss and therefore will not owe taxes. If you've realized a gain over the premiums you've paid into policy, then only gain is taxable. For example, you've paid in $20K and your cash value is $18K. You've already paid taxes on the $20K, so the $18K isn't new income. However, if you paid in $20K and your cash value is $24K, then $4K is taxable because that's over your cost base and will be considered income if you cash the policy out.
