William Byrnes' Tax, Wealth, and Risk Intelligence

William Byrnes (Texas A&M) tax & compliance articles

Posts Tagged ‘Cash value’

Entering the Retirement Income Game? What About Universal Life?

Posted by William Byrnes on January 15, 2014


A new product feature has emerged to help clients looking to supplement retirement income or protect against the risk of outliving their assets, and, in an unusual twist, this feature is not attached to an annuity.  Insurance carriers have thrown universal life insurance policies into the retirement income game by offering accelerated benefit riders that make it easier than ever for clients to access the value of their policies.

For clients looking to secure life insurance protection, longevity insurance, and a steady stream of retirement income, these new guaranteed income withdrawal riders could be the perfect solution!

Read the full analysis of Professor William Byrnes and Robert Bloink at Think Advisor !

Professor William Byrnes is a full time academic providing unbiased, informative critique to his readers.  Subscribers of Tax Facts and of National Underwriters receive weekly strategic industry intelligence such as retirement strategies and client case studies.  ThinkAdvisor.com, an industry news site, supports the professional growth and vitality of the Investment Advisory community, from RIAs and wealth managers of all kinds, to independent broker-dealer and wirehouse representatives. We provide unparalleled access to the knowledge, information and critical resources they need to succeed at every stage in their career, including professional development, education and certification, industry news and analysis, reference tools and services, and community networking opportunities.

Posted in Insurance, Retirement Planning, Wealth Management | Tagged: , , , , , , , | Leave a Comment »

The Value of Variable Life Insurance: Surrender Charges and Fair Market Value

Posted by William Byrnes on July 25, 2013


The U.S. Court of Appeals for the Ninth Circuit recently affirmed the Tax Court’s position on the use of surrender charges in the valuation equation when a nonqualified employee benefit plan that holds a life insurance policy distributes that policy to a taxpayer upon winding up of the plan.

When these life insurance policies are distributed to the taxpayer-employees under such a plan, the taxpayers are responsible for paying taxes on the value of the policies. According to the IRS, the policy value equals the cash value of the policy without regard to any surrender charges. So what do your clients have to include in income if the actual cash surrender value of their life insurance policy is negative?

The Facts

Read the full analysis at ThinkAdvisor – http://www.thinkadvisor.com/2013/05/28/the-value-of-variable-life-insurance-surrender-cha

Posted in Estate Tax, Taxation, Uncategorized, Wealth Management | Tagged: , , , , , , , | Leave a Comment »

Treatment Life Insurance Contracts—Part II: Secondary Market Participants

Posted by William Byrnes on October 20, 2010


Why is this Topic Important to Wealth Managers?  Provides general taxation of life insurance contracts owned by a third party transferee, including the payment of death benefits as well as sale or exchange gain treatment.     

Today’s blogticle will discuss taxation of life insurance contracts from the purchaser’s prospective. 

As discussed yesterday, an insurance contract that carries a built-up cash value can be loaned against, collected by the beneficiary, surrendered or sold to a third party.   This blogticle deals in particular with payment of the face value to the third party caused by the death of the insured as well as another sale or exchange of the contract by the third party.  

What are the tax implications if the third party collects the death benefits?  What are the tax implications if the policy is sold to a third party? 

As a starting point, gross income includes all income from whatever source derived including (but not limited to) income from life insurance contracts (unless otherwise excluded by law).  Gross income specifically excludes amounts received (whether in a single sum or otherwise) under a life insurance contract, if such amounts are paid by reason of the death of the insured.  For the complete article see AdvisorFYI….

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Treatment of the Sale or Exchange of a Life Insurance Contract—Part I

Posted by William Byrnes on October 19, 2010


Why is this Topic Important to Wealth Managers?  Provides general taxation of life insurance contracts that are surrendered, sold or exchanged.  Gives examples that are easy to follow and provides an educational foundation for real-world gain determinations.   

This is a two-part series in relation to the taxation of life insurance contracts once it is surrendered, sold or exchanged to a third party.  The first blogticle will examine the issue from the seller or insured’s perspective, and tomorrow’s blogticle will discuss the matter from the purchaser’s prospective. 

An insurance contract that carries a built-up cash value can be loaned against, collected by the beneficiary, surrendered, or sold to a third party.   This blogticle deals in particular with the sale or exchange of the contract, i.e., surrendered or sold. 

What are the tax implications if the life policy is surrendered?

As a starting point, gross income includes all income from whatever source derived including (but not limited to) income from life insurance contracts (unless the income is otherwise excluded by law). [1]

In general, a life insurance contract that is not collected as an annuity is included in gross income in the amount received over the total premiums or consideration paid. [2]  “The surrender of a life insurance contract does not, however, produce a capital gain.” [3] The amount collected over basis is therefore ordinary income. 

To read the remainder of this article please see AdvisorFYI.

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