Have you purchased a Whole Life or Universal Life policy in the past and find that it is underperforming or no longer economical? Have you taken a loan from the policy to pay premiums or to fund other cash needs? These loans along with underperforming policies may result in unintended lapse of your policy and create taxable income.
Generally, you have 3 options with these policies:
1. Let the policies lapse and pay the taxes on the gain.
2. Repay the loan out of pocket and continue paying ongoing premiums on the policy.
3. Transfer the life insurance and loan to a new policy using a 1035 exchange to allow the transfer without paying taxes. Very often the newer life insurance policies can be more attractive and have benefits that were not available at the time of the original policies.
Many life insurance companies, however, will not allow a 1035 exchange that has a policy loan or the may limit the amount of loan that can be transferred.
We do have 2 quality Life Insurance Companies that are especially good in these types of Policy Loans scenarios. Please email Fred at Fred@AISOA.com to discuss if you can benefit from a Life Insurance Loan Rescue.