Do you own a life insurance policy? If you do, there’s a fact you should know.
FACT: The build-up of cash value in your life insurance policy, coupled with loans against the policy, can create a whopping, unexpected tax bill.
If you want to learn when life insurance policy loans create taxable income, I urge you to read my new article titled Tax Tips: Life Insurance Policy Loan Tax Nightmare.
Three ways our fact-filled article can help you:
- You’ll learn the easy way, what Bruce Brown learned the hard way. Bruce Brown purchased a life insurance policy from Northwestern Mutual Life Insurance Company. Because he borrowed against his policy he fell into a huge tax trap. If you want to avoid that trap, I urge you to read the full article.
- You’ll learn what to do if you’re borrowing against your policy. Many people borrow against their life insurance cash surrender value and have the insurance company offset the death benefit by the outstanding loan amount when they die. However, when a life insurance policy terminates before death, the cash surrender value is taxable and the grim reaper (the IRS) will come after you for taxes. To get the whole story, read the full article.
- We’ll help you avoid a nasty surprise. Take a look at the cash values of your insurance policies, including those that cover your children. Are you using cash values to pay the premiums? If so, you may be creating a tax liability upon termination of the policy. For full details, read the full article.