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Taxation
What are the tax advantages of an annuity?:
Like a life insurance contract, annuities defer your taxability on the buildup of the value of your investment. Also, you can defer taxes on money paid out as an annuity, since you pay tax on the payments as you get them rather than all at once. Tax laws are complex. Check with your tax advisor before you act.
What is the effect on a beneficiary’s federal income tax liability?:
Proceeds of a life insurance claim are generally not subject to federal income tax if it is paid to a named beneficiary.
I am an investor and wish to use viaticals in my ira, Or alternatively, In a keogh, Or defined contribution plan. Is that a problem?
Many viatical settlement companies advertise that IRA or other tax qualified retirement money can be invested in viaticals. But since tax sheltered investment funds from plans such as IRAs or 401ks are generally not allowed to be invested in insurance policies, investors should be warned to consult a knowledgeable tax advisor before investing tax qualified investment money in viaticals.
Are there tax benefits associated with life insurance?
Yes. If you name a beneficiary, death proceeds will pass tax-free to that person upon your death. In a life insurance policy that has cash value, the increase in cash value is not subject to tax — unlike many types of investments.
There are tax-qualified and non-tax qualified plans: a brief word
“Qualified contracts” are defined in the Health Insurance Portability and Accountability Act (HIPAA) that was passed by Congress in 1996. Under a qualified policy, a licensed health care professional must certify every year that you are "chronically ill" and that you have a plan of care. The major benefit of a qualified plan is the deductibility of its premiums, subject to limits, as medical expenses. In addition, the benefits received under qualified plans will not be taxable as income.
Regulations have not been issued regarding the taxability of benefits received under non-qualifying plans; however, the benefit provisions of a qualified plan may be more restrictive that those of a non-qualified plan.
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