The client has a life insurance policy with a cash value of $25,000, but he/she has paid over $50,000 in premiums.  The policy is no longer needed, so the initial reaction is to cash it in.  This will not generate a deductible loss, for income tax purposes.  Here is an alternative;  execute a tax free exchange of the life insurance for a fixed annuity.  The fixed annuity will add tax deferred growth to the cash value each year, and after a period of time the value is back to $50,000.  The $50,000 represents your basis in the contract (the premiums paid).  You can now surrender the annuity and not have any taxable gain, and recover your $50,000.

There is another alternative for consideration.  Take the same policy and investigate a "Life Settlement".  This is a transaction where investor groups purchase policies from individuals who no longer need or can afford them.  These investors will hold the policy, pay the premiums and collect the proceeds at your demise. You will receive an offer of cash.   The offer you receive will depend upon a number of factors. One variable is health.  If you are in poorer health than when you bought the policy, the offer will be better - chances are you will die sooner than someone in excellent health.

Some investment or variable annuities have not performed.  Let's say you own one.  Your deposit was $25,000 and the annuity is worth $15,000.  Again, the tax free exchange can help.  Transfer the annuity to one that provides an initial interest credit (often 4-6%), and place the funds in the contract's guaranteed account.  Again, your value will increase in time to the amount of the investment, and you will be able to get out without a taxable gain.

For assistance in recovering value contact us at 847.509.5090.