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Anthony J. Bardi
Registered Representative
Enrolled Agent, LTC# 454
Tax and Financial Solutions, Inc.
151 SE 223rd Avenue
Gresham, OR 97030
Phone: 503-666-7909
May/June 2019
Life Insurance and Taxes
Life insurance is sometimes called the gift of love. In its most basic form, you buy a life insurance policy for its lump-sum death benefits directed to your beneficiaries. For most people this benefit is a way to financially protect loved ones, but there may be tax consequences, too. The following examines how life insurance may affect your overall.
What Is and Isn’t Taxed
There are no tax benefits connected to premiums you pay for an individual life insurance policy, but you may owe income tax on employer-paid life insurance of more than $50,000 or if your premiums were tax-deductible. Beneficiaries may also owe income tax on employer-paid life insurance if any cash value increased the death benefit. However, death benefits are typically income tax-free to the beneficiary in most instances, and cash value (in those policies that offer it) grows tax-deferred. Dividends, which some life insurance policies pay when expenses are lower than anticipated, also don’t trigger taxes. Dividends are not guaranteed. There are a number of ways that cash value and insurance surrendered during your lifetime can have tax consequences, so work with your financial and tax professionals to make sure you follow the rules.Ownership Matters
Most families that pay life insurance premiums with after-tax money either through the workplace or individually won’t notice any tax advantages until the policy’s death benefits are paid. That’s when beneficiaries receive benefits that are typically income tax-free. This isn’t necessarily the case, though, when it comes to estate taxes. True, the federal estate tax exemption amount has increased markedly to over $11 million (over $22 million for couples filing jointly) in recent years, affecting only a small percentage of Americans. But some states that levy estate and inheritance taxes have much lower tax thresholds.If you use a life insurance trust to buy and own life insurance (with the help of an estate planning attorney), you can help shield loved ones from estate taxes on the death benefit, no matter how much it is.
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Tax and Financial Solutions, Inc. and LTM Marketing Solutions, LLC are unrelated companies. This newsletter was created by LTM Marketing Solutions, LLC and was not written or created by the named financial professional and does not necessarily represent the views and opinions of Cetera Wealth Services LLC or its subsidiaries. Securities offered through Cetera Wealth Services LLC, member FINRA/SIPC. Advisory services offered through Cetera Investment Advisers LLC, a registered investment adviser. Cetera is under separate ownership from any other named entity.
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