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Cost-Free Transfer Can Breath Life Into Insurance
If you, like so many others, purchased variable life insurance coverage, you are probably disappointed. Between poor market performance and contract costs, many of these policies have values well below the amount invested.
The problem is compounded by the fact that surrendering the contract
will only yield the net value and there is no tax relief from losses,
as with traditional investments.
There is a strategy that can make the situation more palatable. Transfer the value of the variable life policy to a variable annuity. This can be done on a completely tax-free and cost-free basis, under Internal Revenue Section 1035.
If you use a “c” share annuity, with no surrender charges, you can, after one year and one day, surrender the annuity and claim the amount of the loss against ordinary income instead of capital gains- what an advantage.
Of course, if the annuity generates gains, you can keep it and enjoy the recovery of your investment. As an added advantage, you can withdraw the original investment in the annuity with no tax as it is a withdrawal of basis, and leave the gain in a tax-deferred contract with no surrender charges.
Of course, this strategy presupposes that you can give up the life insurance or will replace the coverage in other ways, i.e. term insurance.
It is critical to use a “c” share annuity contract so you don’t find yourself locked into an investment with surrender charges for several years. For further information about this strategy, contact Associates in Financial Planning at 800-428-9786 or 847-509-5090.
There is a strategy that can make the situation more palatable. Transfer the value of the variable life policy to a variable annuity. This can be done on a completely tax-free and cost-free basis, under Internal Revenue Section 1035.
If you use a “c” share annuity, with no surrender charges, you can, after one year and one day, surrender the annuity and claim the amount of the loss against ordinary income instead of capital gains- what an advantage.
Of course, if the annuity generates gains, you can keep it and enjoy the recovery of your investment. As an added advantage, you can withdraw the original investment in the annuity with no tax as it is a withdrawal of basis, and leave the gain in a tax-deferred contract with no surrender charges.
Of course, this strategy presupposes that you can give up the life insurance or will replace the coverage in other ways, i.e. term insurance.
It is critical to use a “c” share annuity contract so you don’t find yourself locked into an investment with surrender charges for several years. For further information about this strategy, contact Associates in Financial Planning at 800-428-9786 or 847-509-5090.