TAX- Life/ Accident and Health Insurance + Life Polices
Annuitant lives beyond life expectancy...
100% taxable income
1035 Exchange
A to L= gains taxable; spouse to spouse no tax penalty
HSA
Contributions are taxable; earnings grow tax deferred; withdrawals are tax free for medical expenses; HDHP; account value accumulates year to year
Variable Universal Life
DB= adjustable, level or increasing options Prem= flexible, scheduled CV= varies with investment performance
Level Term
DB= expires at end of term Prem= fixed, schedule, increase at renewals CV= none
Whole Life
DB= fixed and level Prem= fixed, scheduled, level CV= fixed and guarenteed
Variable Life
DB= varies with investment performance Prem= fixed, scheduled, level CV= varies with investment performance
FSA (cafeteria plan)
EE authorizes ER to reduce EE's salary; ER puts $ into account; withdrawals by EE are not taxed; spend it or lose it.
HRA
Est. by ER; ER contributions are pretax
Accelerated Death Benefit
Not taxed
Death Benefits
Not taxed if paid in lump sum, interest is taxable
Cash Value Loans
Not taxed while policy is in force
Dividends
Not taxed, only interest earned is taxed
Withdrawls
Only the gains are taxed or if withdrawal exceeds premiums paid
Taxation of Business Life Policies
Premiums are not tax deducible except for executive bonus, DB not taxable, Premiums for executive bonus are taxable income to EE
Taxation of Annuities
Premiums not tax deductible, interest during accumulation period are not taxed, income tax on interest, 10% penalty on interest if YOUNGER than 59.5; exclusion ratio
Taxation of Group Life Insurance
Premiums paid by ER are tax deductible, premiums paid by EE are not tax deductible; DB not taxable
Estate Taxes
Taxes due to transfer of wealth; death during accumulation= entire value+ cost included; death during annuitization= present value of future payments included
Modified Endowment Contract (MEC)
Too much premium paid in first 7 years; interest on CV is not taxed while in policy; 10% penalty on interest if withdrawn before 59.5 years old unless disabled; ONCE A MEC ALWAYS A MEC
Full surrenders
any gain in CV is taxable
Tax for Self-Employed
deduct premiums if net profit from business; benefits not taxable
Accelerated DB
not taxed
DB
not taxed if paid in lump sum
CV loans
not taxed while in force
Dividends
not taxed; only interest earned is taxed
withdrawals
only gain is taxed
dividends
only interest earned is taxed
Tax for LTC
premium deductible to ER, not taxable to EE; benefits are TAX FREE TO ALL up to inflation index limit for indeminity plans
BOE
premiums are deductible and benefits are taxable
business life policies
premiums not tax deductible; only executive bonus
Benefits paid by personally owned accident, health, disability, or LTC policies are generally.
received income tax free
MSA
same has HSA but for groups 50 and smaller
Premiums paid by a company for a group medical for its EE's are....
tax deductible for the company, and not considered taxable income to the EEs
Partial surrender (withdrawals)
taxable to FIRST IN FIRST OUT
Accumulations are....
taxable when paid out
