Life Insurance Tax Advantages Repealed if Trump Wins

[DHK]

1. Yes, I'll agree with that.

2. No. The interest and dividends (if any) become taxable when they are not currently taxable. That's an annual taxation obligation via 1099. Just having cash values with no gains won't be an issue. That's just a return of principal within the policy.


However, non-par whole life generally won't be under attack. It'll be the participating WL and IUL policies that would be most affected by such legislation.

 

[Robert Barney]

I would conclude then that the focus of government on taxing life insurance is not an interest in taxing the insurance, but is rather a focus on taxing products that have morphed from being insurance to being investment vehicles. The industry defending those products as insurance when dealing with politicians, but when selling those products to the public, emphasize them as investments. And it's not as though that hypocrisy is not recognized by politicians.

To summarize, it is the life insurance industry which has shot itself in the foot. It may not be this election cycle but at some point these products will be taxed. It's hardly fair to another group of investments, to tax those, while exempting another group of investments simply because of who is selling them.

 

[Justin Bilyj]

With IUL I get that, but par wl is usually a Mutual that is selling it, would be no different than a credit union imo, just a return of principal. Kinda sh*tty if they were to tax a return of your original premium...

 

[Robert Barney]

With IUL I get that, but par wl is usually a Mutual that is selling it, would be no different than a credit union imo, just a return of principal. Kinda sh*tty if they were to tax a return of your original premium...

Yes, but when you push the product designs beyond what is reasonable, then you invite politicians to eyeball it for taxation, and then you deal with the risk of where they decide to draw the line.

Seen it all before in Canada.

The march of the U.S. to the left, is a rerun of what went on there.

 

[DHK]

The industry has already been through all that in the 80's - TAMRA, DEFRA, TEFRE all redefined the metrics to make life insurance what it is today - with the 7-pay test, etc.

 

[Robert Barney]

The industry has already been through all that in the 80's - TAMRA, DEFRA, TEFRE all redefined the metrics to make life insurance what it is today - with the 7-pay test, etc.

And that's why the industry continues to push the envelope. Instead of selling insurance, it wants a piece of the piggy bank business, trying to leverage its tax deferred products into an unfair advantage over investment alternatives that do not have the same tax advantages.

Once the tax man cometh, you won't get him out.

 

[djs]

Truth is, the devil is in the details and there are no details yet. Everything is a guess on what might happen.

So, I might as well as guess too, as long as you realize its a guess.

True death benefit remains untaxed.
Cash value, over the basis, is taxed as income, but only when distributed, basically tax deferred as with retirement plans.

To me, this actually makes sense.

Dan

 

[LGilmore]

First off, you guys are almost assuming Trump is going to win.

As DHK pointed out, this has been dealt with already.

If something were to be at current risk it would be health insurance benefits taxation. Pretty much the only thing where no taxes are paid for the premium and no taxes are collected for the benefit. With everything else, it's one or the other.

Do I think it's going to happen? no.

 

[Robert Barney]

Whether or not Trump wins, the idea is out there.

Consider the impact he has had on the illegal immigration discussion. Once politicians start talking about a subject, many others get on board. In the case of Trump: X10.

 

[DHK]

It's been out there for decades. It really isn't anything new.