Life Insurance Tax Breaks
There are many important benefits to buying life insurance, from peace of mind to enhanced financial stability. . In fact there are so many other reasons that life insurance is a good deal that many people lose sight of the important tax benefits and special tax considerations life insurance proceeds enjoy.
It seems that those whose job it is to write the tax code understand the importance of life insurance just as well as ordinary consumers, and those legislators have written a number of special considerations into the tax code for life insurance policies and life insurance proceeds.
Here is just one example of the special tax treatment life insurance proceeds often enjoy. In many states life insurance policies that are not payable in the taxpayer’s home state enjoy an exemption from the probate process. This provision alone can result in significant cost savings for the estate, as well as a reduction in hassle and red tape.
In addition, life insurance proceeds are typically exempt from any claims creditors may have had on the deceased individual, providing yet another potential savings. Furthermore, the gains associated with the death benefit of a life insurance policy is typically not subject to ordinary income tax. In addition the cash value of whole life, universal life and other investment centered policies enjoys a special tax treatment, making these policies a good choice for individuals in all income brackets.
But it is not only individuals who can benefit greatly from life insurance policies. Corporations and other businesses can also enjoy significant tax savings with the right mix of life insurance policies, and many businesses take full advantage of these tax write-offs. From life insurance policies granted to employees as a fringe benefit to key man coverage to protect the organization against the loss of vital executives, there are many life insurance options available to the business community. The special tax treatment those purchases often receive is yet one more advantage of purchasing life insurance.
There are many additional tax benefits and special treatment provisions written into the tax code, and new laws are written every single year. The U.S. tax code is constantly changing and evolving, and it is important for each policyholder to review the laws associated with his or her particular life insurance policy. Life insurance policies provide many important benefits for both the insured and the beneficiaries. The special tax treatment these policies and their proceeds enjoy is just one more reason why anyone with a family to protect should have adequate life insurance coverage in place.