Tax Treatment of Life Insurance Proceeds

CPAs, EAs, CRTPs

Tax considerations play a critical role in life insurance planning, just as they do in other financial decisions. This course examines the tax treatment of life insurance proceeds, including death benefits, cash value withdrawals, loans, and policy surrenders. It also explores special situations that impact taxation, such as modified endowment contracts, employer-owned policies, and use in qualified retirement plans.

• Calculate the gain to be recognized as a result of various life insurance policy transactions, including withdrawals, loans, surrenders, and payment of death benefits
• Identify the changes to the customary tax treatment of life insurance policy living proceeds resulting from the policy being deemed a modified endowment contract (MEC)
• Calculate the reportable gain upon receipt of life insurance policy death benefits when the life insurance policy has been transferred for valuable consideration or was included in a qualified plan
• Recognize the types of life insurance exchanges that are tax-free under IRC section 1035
• Define the terms “terminally ill” and “chronically ill” as used in the Health Insurance Portability and Accountability Act
• Identify the income tax treatment of accelerated death benefits, viatical settlements, and life settlements.