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Do beneficiaries pay taxes on life insurance when they receive a death benefit? Generally speaking, when the beneficiary of a life insurance policy receives the death benefit, this money is not counted as taxable income, and the beneficiary does not have to pay taxes on it. However, a few situations exist in which the beneficiary is taxed on some or all of a policy’s proceeds. If the policyholder elects not to have the benefit paid out immediately upon his death but instead held by the insurance company for a given period of time, the beneficiary may have to pay taxes on the interest generated during that period. When a death benefit is paid to an estate, the person or persons inheriting the estate may have to pay estate taxes on it.
Interest Income
Income earned in the form of interest is almost always taxable at some point. Life insurance is no exception. This means when a beneficiary receives life insurance proceeds after a period of interest accumulation rather than immediately upon the policyholder’s death, he must pay taxes, not on the entire benefit, but on the interest. For example, if the death benefit is $500,000, but it earned 10% interest for one year before being paid out, the beneficiary may owe taxes on the $50,000 growth.
Estate and Inheritance Taxes
In some cases, life insurance proceeds are paid to the estate of the deceased. This most often happens when the policy’s beneficiary precedes the policyholder in death and no contingent beneficiary is named. The death benefit adds to the value of the estate, which may be subject to estate taxes or inheritance taxes. The easiest way to avoid this situation is to name a primary and contingent beneficiary to a life insurance policy.
Upcoming Events
Fall Workshop at Eschels Financial Group: A rare opportunity to have both Protective Fixed Indexed Annuities and Variable Annuities on
Thursday, September 15th from 10am-11am. Angel Tepe and Jeff Lindeman from Protective Life will share their compelling ideas for utilizing both annuities for clients in securing a safe retirement plan and to participate fully in the upside of the stock market.
If you are a Registered Representative, you owe it to yourself to join us and discover the ease of splitting the ticket to create the strongest presentations for your clients. If you are a traditional insurance agent, you owe it to yourself to join us to learn of Protective’s progressive income rider stories, and ways to present a secure paycheck for a client after they stop working.
When: Thursday, September 15, 2016
Time: 10am-11am EST **** light breakfast served at 9:30am****
Where: Eschels Financial Group Conference Room, 555 South Old Woodward Ave, Birmingham, Michigan
To reserve a seat: Call us at 248-644-1144
We look forward to seeing you then!
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Plan now to attend
As a financial, investment, retirement, or accounting professional, long-term care planning can be challenging–specifically because it may not be the primary focus of your practice. In fact, you may even avoid it. Yet at the same time, learning about long-term care could be one of the most crucial ways to serve your clients. A potential exposure so great, it could render all other strategies meaningless.
Join us for a free webinar and learn options available for your clients with the Care Solutions–a portfolio of asset-based LTC products that can provide tax advantages and benefits even if care is never needed.
During this webinar you will learn:
- How certain annuities can benefit from the Pension Protection Act and provide income tax free withdrawals for LTC
- About products that issue all the way up to age 85
- How to use qualified money to gain long-term care benefits
- How to speak with your clients about a negative topic (LTC) in a positive way
This learning opportunity will give you the ‘nuts and bolts’ of our products and arm you with the knowledge you need to succeed. At the same time, you will gain a level of comfort and learn how to broach this at times difficult topic with your clients.
Register today! |
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Featured Speaker:
Chris Huntsman,
Senior Development Wholesaler
OneAmerica
Full Product Webinar:
– Client presentation (advisors only)
– Asset-Care (hybrid life/LTC)
– Annuity Care (hybrid fixed annuity/LTC)
Click Date/Time to Register for Webinar:
* All times Eastern
Friday, September 9th at 11:00 AM |
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How can Fixed Indexed Annuities help clients retire on schedule?
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Fixed annuities, with their guaranteed interest rates and guaranteed return of principal (less any withdrawals of interest or principal) can help preserve client’s assets, potentially softening the impact of a choppy stock market on their accounts.
- A conservative approach….. provides the client with safety of principal, tax- advantages, liquidity, and legacy planning.
The Next Big Thing in Annuities: If you’re not talking with your clients about QLACs, expect that your competition is. Learn how big this opportunity really is!
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It is imperative to explore all financial options for the clients- why let a client lapse or surrender a policy when determining there is an alternative. Life Settlements- Life Insurance , like every other asset, has a Market Value. Before your client considers letting a policy go, call us to discuss the specifics. And interestingly, all policy types are considered now for Life Settlements- even convertible term insurance. The reality is: you will set yourself apart from other advisors and agents by educating clients on Life Settlements and the options for the unwanted/unneeded life insurance. Clients remember you told them about an idea that others did not- and isn’t that what we want as agents and financial advisors? To be distinguished as unique, with different and compelling ideas for clients provides them with more than the average agent.
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Are you aware within Fixed Indexed Annuities and Indexed Life Insurance there are 100% participation in the various indices up to the caps? Are you aware there are uncapped (yes uncapped) index strategies allowing the client the full index performance less a spread? Why is any of this important? Because clients have told this industry after 2008 that they no longer can endure the wild rides with their money. They have firmly said they are aware they need some exposure to the non-guaranteed markets, but they now also know they must be more diligent with safety, as their individual lives are uncertain and when retirement happens often is not by choice but more by circumstance.
See the attached White Paper by Allianz Life Insurance Company “Reclaiming the Future”
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