Hefty Tax Bills Could Lurk in Failed Life Insurance Policies

This may have some consequences on people who use the LEAP or Infinite Banking methodologies where the concept (as I understand it) is to borrow off the policy and pay 'yourself' back... being your own banker.
 
Wrong, nylife11023. It's not a consequence of "LEAP" or "Infinite Banking" methodologies.

It comes directly down to this:

The moral, Mr. Henske said, is to review life insurance policies on a regular basis, but also to make sure that if the client is considering surrendering or letting the policy lapse — or exchanging it for another — to ask the insurer for a quote on what the taxable income would be.

“It comes back to policy monitoring,” said E. Randolph Whitelaw, founder of the TOLI Center. ”Most people don't understand how life insurance works. If they have loans, they have a problem.”

In other words: Agents must service what they sell.

Agents that use the LEAP and Infinite banking strategies MUST do regular reviews of the strategy with the client. If not, they are contributing to a (potential) problem by ignoring the client's needs.
 
In other words: Agents must service what they sell.

Absolutely correct. But I'm sure there are lots of people who are in LEAP or Infinite Banking plans whose agents have left the business. They may not be getting any service from anyone.

I don't know about LEAP, but a concept similar to Infinite Banking called Be Your Own Banker is 'pitched' to people (non-agents) via a popular book by a Pamela Yellen (I've not read it.) I wonder how many people try to follow this book on their own without an agent schooled in the methodology?

Fortunately we seem to be heading into a period of higher interest rates so perhaps we won't see too many policies (with loans out on them) go underwater and get lapsed or get cashed.
 
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