Wealth & Risk Management Blog

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

Posts Tagged ‘Loan’

When are policy loans taxable?

Posted by William Byrnes on November 23, 2011


Generally, life insurance policies be withdrawn without income tax consequences. However, there are circumstances where a “loan” is immediately taxable. We have covered situations where a policy is surrendered with a loan outstanding, resulting in taxable income. This article discusses another case where a policy “loan” will be treated as taxable income.

In Frederick D. Todd II et ux. v. Commissioner (T.C. Memo. 2011-123), the Tax Court considered whether a distribution from a welfare benefit fund to a fund participant was a policy loan or a taxable distribution.

For previous coverage of life insurance policies held by welfare benefit funds in Advisor’s Journal, see Deductions for Life Insurance Premium Payments to Welfare Benefit Plan Denied (CC 10-29).

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For in-depth analysis of welfare benefit funds, see Advisor’s Main Library: B—Welfare Benefit Funds.

 

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Report Slams Reverse Mortgages

Posted by William Byrnes on January 13, 2011


Reverse mortgages are facing renewed scrutiny after the December 7 release of the Consumer Union Report, Examining Faulty Foundations in Today’s Reverse Mortgages.  According to the report, reverse mortgages are suitable for only a small slice of low-income seniors, and seniors often enter into the contracts without understanding the financial consequences, including the high fees and interest charges attached to the mortgage products.

“Reverse mortgages are a very risky deal for borrowers who don’t understand the complicated terms of the loan and how quickly fees and interest charges can add up,” said Norma Garcia, an attorney with Consumer Union.  Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

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