by Guest » Thu Feb 10, 2011 06:52 am
I have a single-premium whole life policy that I purchased for $100,000 a few years ago. If I understand it correctly, it has a $450,000 face value, and the additional premium has been applied towards purchasing an additional insurance rider each year. The annual premiums are a little over $15,000 annually, and the premise on which the policy was sold to me was that the annual dividends and extra premium that I paid originally would be sufficient (at least under then-current projections) to not only pay the premiums each year but to build up substantial cash value in the policy as I grew older. The policy was really intended more as an investment vehicle than a life insurance policy, and I don't need any additional insurance beyond the face value amount; I was told that the additional rider is being purchased from the extra single-payment proceeds that I used to buy the policy in order that it not be considered a MEC.
At some point last year, my agent had me fill out a form that authorized the insurer to take out a loan against the policy itself in order to pay that year's annual premium, and then authorized me to use ALIR to pay back the loan. (I confess that I did not and perhaps still do not understand this transaction.) In any event, I received a Form 1099-R this month indicating that I received a distribution equal to the amount of my annual premium payment plus the interest on the loan. Of course, I never received any cash distribution, so I am now looking at having a tax liability on $15,000 plus of phantom "income," which does not please me.
Can anyone explain to me why this was considered a taxable event and what I should be doing in the future to make sure that it does not happen again? Did my agent advise me incorrectly in using a loan against my policy in order to pay the annual premium? Was/is there some other alternative for paying the annual premium that should have been used and that should be used in the future?
Thanks in advance.
At some point last year, my agent had me fill out a form that authorized the insurer to take out a loan against the policy itself in order to pay that year's annual premium, and then authorized me to use ALIR to pay back the loan. (I confess that I did not and perhaps still do not understand this transaction.) In any event, I received a Form 1099-R this month indicating that I received a distribution equal to the amount of my annual premium payment plus the interest on the loan. Of course, I never received any cash distribution, so I am now looking at having a tax liability on $15,000 plus of phantom "income," which does not please me.
Can anyone explain to me why this was considered a taxable event and what I should be doing in the future to make sure that it does not happen again? Did my agent advise me incorrectly in using a loan against my policy in order to pay the annual premium? Was/is there some other alternative for paying the annual premium that should have been used and that should be used in the future?
Thanks in advance.
Posted: Sat Feb 19, 2011 11:37 pm Post Subject:
Well, this thread is pretty interesting...
Posted: Sun Feb 20, 2011 01:55 am Post Subject:
LOL, Feel free to jump in wherever you like. At this point, the score is 2 experienced Forum Experts vs. one guest who chooses not to be identified (his bogus reasoning is outlined above) and according to some, he might be winning. I guess we could use all the help we can get.
LOL
Posted: Sun Feb 20, 2011 02:13 am Post Subject:
In all fairness, that's not really a bogus reason. Any registered rep would be dumb to post their name publicly because as he mentioned, they have to have every single thing posted approved by compliance and that would never happen (i.e. might as well not post in the first place). Posting anonymously removes that obstacle.
I am not sure why Max is commenting on securities if he is a licensed agent. That's a pretty fine line to walk....I believe you (InsInvestigator), on the other hand, are not licensed and therefore can post all you want about it.
Nothing personal against Max, but I think he's still describing current assumption UL's and ignoring that no-lapse UL products exist and how they work.
Regardless, interesting back and forth...
Posted: Mon Feb 21, 2011 12:11 pm Post Subject:
LOL, Feel free to jump in wherever you like. At this point, the score is 2 experienced Forum Experts vs. one guest who chooses not to be identified (his bogus reasoning is outlined above) and according to some, he might be winning. I guess we could use all the help we can get.
InsInvestigator,
Instead of trying to "win" like this is one of your famous court cases, take some time to explore if what I'm saying might be correct.
When you do things like call my reasoning bougus for keeping my anonymity, it makes it appear like you are lacking knowledge in the subject or you really don't care about the truth.
It's a shame that you can't see that Max's posts show that he really doesn't understand the secondary guarantees of some UL products which leads me to think that you might not either.
Also, if you can’t see how my like or dislike of VUL has absolutely nothing to do with the sale that I made to my client, it is also tough to see how you fully understand the products.
You would not be disagreeing with me if you had a better understanding. Dgoldenz or Insurance Teacher or anyone else on this board isn’t going to agree with you in this thread because you and Max are incorrect.
Add your comment