What are some of the tax advantages provided by universal life insurance?
Life insurance products like universal life provide significant tax advantages over other wealth accumulation products. Withdrawals up to the amount of premiums paid are not subject to income taxation under income tax law. Secondly, unlike annuities, cash value withdrawn from life insurance (so long as it is not a MEC) is not subject to IRS pre-59 withdrawal penalties. Also, the death benefit from a life insurance policy passes income tax-free to the beneficiary. This is not only a great estate planning tool for the individual but also a great fit for the business market for purposes such as a buy-sell agreements or for key-person coverage.
Life insurance products like universal life provide significant tax advantages over other wealth accumulation products. First of all, cash value withdrawn from UL will be taxed on a first in, first out basis. This means funds contributed come out first and are not assessed any income tax. Interest earnings are taxable but are considered to come out last. Consequently, all cash value withdrawn that is less than or equal to premiums contributed will be tax-free. Secondly, unlike annuities, cash value withdrawn from life insurance is not subject to IRS pre-59 withdrawal penalties. Also, the death benefit from a life insurance policy passes income tax-free to the beneficiary. This is not only a great estate planning tool for the individual but also a great fit for the business market for purposes such as buying and selling or key-person coverage.
Life insurance products like universal life provide significant tax advantages over other wealth accumulation products. First of all, cash value withdrawn from UL will be taxed on a first in, first out basis. This means funds contributed come out first and are not assessed any income tax. Interest earnings are taxable but are considered to come out last. Consequently, all cash value withdrawn that is less than or equal to premiums contributed will be tax-free. Secondly, unlike annuities, cash value withdrawn from life insurance is not subject to IRS pre-59 ?withdrawal penalties. Also, the death benefit from a life insurance policy passes income tax-free to the beneficiary. This is not only a great estate planning tool for the individual but also a great fit for the business market for purposes such as buying and selling or key-person coverage.
