TAX FREE/TAX FAVORED

Some information that is neglected when discussing life insurance is the taxation of insurance dollars.

Life Insurance proceeds, when properly structured, are distributed to the beneficiaries tax free.

If the insurance is a permanent policy (Universal Life, Whole Life, Indexed Life or Variable Life) it will have a cash value. The growth of the cash value from year to year is not subject to income tax. If people decide to access their cash value, withdrawl of funds up to the paid premium amount is merely fo return of premium and not subject to income tax. If cash value is borrowed, there would be no income tax. Certainly, it can be stated that the cash value of life insurance is tax favored.

Tax free and/or tax favored, the classic life insurance policy does allow funds to stay with the insureds and their families without a tax drain.

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