Re: Life Insurance Cash Out

[Guest guest]

My insurance with my former job had a half Dead clause. If your Doc would sign a form that you should only live 2 years they would pay me half the policy before i was gone. I did not have to pay the IRS but had to list it on a special form. Then I rebought the other half at twice the price of the old hole policy since I was over 60 and a high risk P PM (Polymositis) 12/98, UIP 8/00, o2 24/7 10 LPM 8/04, PH 3/06, ILL yo 61REMEMBER : All of you on Prednisone'stressed' spelled backwards is 'desserts'Subject: Life Insurance Cash OutTo: Breathe-Support Date: Friday, January 22, 2010, 5:20 PM

Does anyone know if you cash out a life insurance policy, do you have to pay taxes. I need to sell my house but I have many repairs to do and need the money from my life insurance. I don't have children so I figure I could use the money rather than let it go to the state. Let me know your thoughts.

AB

[Guest guest]

Sorry Income is Income is Income, except if it is on someone who passed away. Dyane, 54, Phoenix, IIP 02 now NSIP 09, Breast Cancer, Psoriasis, Lipodermatosclerosis, Diabetes, and now a RA like autoimmune component, yadda yadda yadda."Life is not a journey to the grave with intentions of arriving is a pretty, well-preserved body, but rather to skid in broadside, thoroughly used up, totally worn out, chocolate in one hand, Margaritas in the other, loudly proclaiming "Holy **** What a ride!"."To: Breathe-Support Sent: Fri, January 22, 2010 4:20:06 PMSubject: Life Insurance Cash Out

Does anyone know if you cash out a life insurance policy, do you have to pay taxes. I need to sell my house but I have many repairs to do and need the money from my life insurance. I don't have children so I figure I could use the money rather than let it go to the state. Let me know your thoughts.

AB

[Guest guest]

Adrienne

Life insurance is not subject to income tax because it wasn't a tax

deduction when purchased.

>

> Does anyone know if you cash out a life insurance policy, do you have

to pay taxes. I need to sell my house but I have many repairs to do and

need the money from my life insurance. I don't have children so I

figure I could use the money rather than let it go to the state. Let me

know your thoughts.

> AB

>

[Guest guest]

Ok I take that back, haven't had to deal with that on taxes, better look it up SORRY LOL Dyane, 54, Phoenix, IIP 02 now NSIP 09, Breast Cancer, Psoriasis, Lipodermatosclerosis, Diabetes, and now a RA like autoimmune component, yadda yadda yadda."Life is not a journey to the grave with intentions of arriving is a pretty, well-preserved body, but rather to skid in broadside, thoroughly used up, totally worn out, chocolate in one hand, Margaritas in the other, loudly proclaiming "Holy **** What a ride!"."To: Breathe-Support Sent: Fri, January 22, 2010 4:50:00 PMSubject: Re: Life Insurance Cash Out

Sorry Income is Income is Income, except if it is on someone who passed away. Dyane, 54, Phoenix, IIP 02 now NSIP 09, Breast Cancer, Psoriasis, Lipodermatosclerosi s, Diabetes, and now a RA like autoimmune component, yadda yadda yadda."Life is not a journey to the grave with intentions of arriving is a pretty, well-preserved body, but rather to skid in broadside, thoroughly used up, totally worn out, chocolate in one hand, Margaritas in the other, loudly proclaiming "Holy **** What a ride!"."From: Adrienne Bishop <eggie5909 (AT) yahoo (DOT) com>To: Breathe-Support@ yahoogroups. comSent: Fri, January 22, 2010 4:20:06 PMSubject: Life Insurance Cash Out

Does anyone know if you cash out a life insurance policy, do you have to pay taxes. I need to sell my house but I have many repairs to do and need the money from my life insurance. I don't have children so I figure I could use the money rather than let it go to the state. Let me know your thoughts.

AB

[Guest guest]

Dyane/AdrienneLet me correct what I said and clarify Dyane's comment. Surrender of policy for cash.

If you surrender a life insurance policy for cash, you must include

in income any proceeds that are more than the cost of the life

insurance policy. In general, your cost (or investment in the contract)

is the total of premiums that you paid for the life insurance policy,

less any refunded premiums, rebates, dividends, or unrepaid loans that

were not included in your income.So the answer is some portion is taxable and some isn't. There are also many special conditions applying to specific cases. For instance the accelerated death benefits refers to are not taxable.>> Sorry Income is Income is Income, except if it is on someone who passed away.> > Dyane, 54, Phoenix, IIP 02 now NSIP 09, Breast Cancer, Psoriasis, Lipodermatosclerosis, Diabetes, and now a RA like autoimmune component, yadda yadda yadda.> > > "Life is not a journey to the grave with intentions of arriving is a pretty, well-preserved body, but rather to skid in broadside, thoroughly used up, totally worn out, chocolate in one hand, Margaritas in the other, loudly proclaiming "Holy **** What a ride!"."> > > > > > ________________________________> To: Breathe-Support > Sent: Fri, January 22, 2010 4:20:06 PM> Subject: Life Insurance Cash Out> > > Does anyone know if you cash out a life insurance policy, do you have to pay taxes. I need to sell my house but I have many repairs to do and need the money from my life insurance. I don't have children so I figure I could use the money rather than let it go to the state. Let me know your thoughts.> AB>

[Guest guest]

Dyane

I took mine back too and cut and paste.

Upon death of course life insurance isn't subject to income tax but it

is complicated in other circumstances with specific rules for each.

>

> Ok I take that back, haven't had to deal with that on taxes, better

look it up SORRY LOL

>

> Dyane, 54, Phoenix, IIP 02 now NSIP 09, Breast Cancer, Psoriasis,

Lipodermatosclerosis, Diabetes, and now a RA like autoimmune component,

yadda yadda yadda.

>

>

> " Life is not a journey to the grave with intentions of arriving is a

pretty, well-preserved body, but rather to skid in broadside, thoroughly

used up, totally worn out, chocolate in one hand, Margaritas in the

other, loudly proclaiming " Holy **** What a ride! " . "

>

>

>

>

>

> ________________________________

> From: Dyane Billings dyanebillings@...

> To: Breathe-Support

> Sent: Fri, January 22, 2010 4:50:00 PM

> Subject: Re: Life Insurance Cash Out

>

>

> Sorry Income is Income is Income, except if it is on someone who

passed away.

>

> Dyane, 54, Phoenix, IIP 02 now NSIP 09, Breast Cancer, Psoriasis,

Lipodermatosclerosi s, Diabetes, and now a RA like autoimmune component,

yadda yadda yadda.

>

>

> " Life is not a journey to the grave with intentions of arriving is a

pretty, well-preserved body, but rather to skid in broadside, thoroughly

used up, totally worn out, chocolate in one hand, Margaritas in the

other, loudly proclaiming " Holy **** What a ride! " . "

>

>

>

>

>

> ________________________________

> From: Adrienne Bishop eggie5909 (AT) yahoo (DOT) com>

> To: Breathe-Support@ yahoogroups. com

> Sent: Fri, January 22, 2010 4:20:06 PM

> Subject: Life Insurance Cash Out

>

>

> Does anyone know if you cash out a life insurance policy, do you have

to pay taxes. I need to sell my house but I have many repairs to do and

need the money from my life insurance. I don't have children so I

figure I could use the money rather than let it go to the state. Let me

know your thoughts.

> AB

>

[Guest guest]

Adrienne maybe you have a policy that has a cash value and you can take a loan out on it. I did that in the past on mine and you pretty much are paying yourself back. If something does happen to you before the loan is paid back they just take that off the top . Gascoigne SD, 50 yrs old, Renaud's 2008, IPF 7/2009To: Breathe-Support Sent: Fri, January 22, 2010 5:20:06 PMSubject: Life Insurance Cash Out

Does anyone know if you cash out a life insurance policy, do you have to pay taxes. I need to sell my house but I have many repairs to do and need the money from my life insurance. I don't have children so I figure I could use the money rather than let it go to the state. Let me know your thoughts.

AB

[Guest guest]

Bruce,

Once again, a good answer but, I believe Life Insurance dividends are non taxable. Insurance sales people used to brag about this and as a tax shelter, (non-taxable income.) But actually, they are non-taxable because the IRS considers them "overpayment of premium"

Bob

Subject: Re: Life Insurance Cash OutTo: Breathe-Support Date: Friday, January 22, 2010, 6:58 PM

Dyane/AdrienneLet me correct what I said and clarify Dyane's comment. Surrender of policy for cash. If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. In general, your cost (or investment in the contract) is the total of premiums that you paid for the life insurance policy, less any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income.So the answer is some portion is taxable and some isn't. There are also many special conditions applying to specific cases. For instance the accelerated death benefits refers to are not taxable.>> Sorry Income is Income is Income, except if it is on someone

who passed away.> > Dyane, 54, Phoenix, IIP 02 now NSIP 09, Breast Cancer, Psoriasis, Lipodermatosclerosi s, Diabetes, and now a RA like autoimmune component, yadda yadda yadda.> > > "Life is not a journey to the grave with intentions of arriving is a pretty, well-preserved body, but rather to skid in broadside, thoroughly used up, totally worn out, chocolate in one hand, Margaritas in the other, loudly proclaiming "Holy **** What a ride!"."> > > > > > ____________ _________ _________ __> From: Adrienne Bishop eggie5909@.. .> To: Breathe-Support@ yahoogroups. com> Sent: Fri, January 22, 2010 4:20:06 PM> Subject: Life Insurance Cash Out> > > Does anyone know if you cash out a life insurance policy, do you have to pay taxes. I need to sell my house but I have many repairs to do and need the money from my life

insurance. I don't have children so I figure I could use the money rather than let it go to the state. Let me know your thoughts.> AB>

[Guest guest]

Joyce I can take a loan against my insurance because mine has a cash value. And be careful on those reverse mortgages. You also can take loans against your house too, if you equity built up Gascoigne SD, 50 yrs old, Renaud's 2008, IPF 7/2009To: Breathe-Support Sent: Fri, January 22, 2010 7:42:13 PMSubject: Re: Re: Life Insurance Cash Out

can you take a loan against your insurance policy

or a loan against your house

i think it's called a home equity loan

i am aware of reverse mortgages, but don't know how they work

Pink Joyce R (IPF 3/06) IFA 5/09 Pennsylvania

Donate Life Listed 1/09 Inactive 4/09

www.transplantfund. org

From: Bruce <brucemoreland@ gmail.com>Subject: Re: Life Insurance Cash OutTo: Breathe-Support@ yahoogroups. comDate: Friday, January 22, 2010, 6:58 PM

Dyane/AdrienneLet me correct what I said and clarify Dyane's comment. Surrender of policy for cash. If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. In general, your cost (or investment in the contract) is the total of premiums that you paid for the life insurance policy, less any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income.So the answer is some portion is taxable and some isn't. There are also many special conditions applying to specific cases. For instance the accelerated death benefits refers to are not taxable.>> Sorry Income is Income is Income, except if it is on

someone

who passed away.> > Dyane, 54, Phoenix, IIP 02 now NSIP 09, Breast Cancer, Psoriasis, Lipodermatosclerosi s, Diabetes, and now a RA like autoimmune component, yadda yadda yadda.> > > "Life is not a journey to the grave with intentions of arriving is a pretty, well-preserved body, but rather to skid in broadside, thoroughly used up, totally worn out, chocolate in one hand, Margaritas in the other, loudly proclaiming "Holy **** What a ride!"."> > > > > > ____________ _________ _________ __> From: Adrienne Bishop eggie5909@.. .> To: Breathe-Support@ yahoogroups. com> Sent: Fri, January 22, 2010 4:20:06 PM> Subject: Life Insurance Cash Out> > > Does anyone know if you cash out a life insurance policy, do you have to pay taxes. I need to sell my house but I have many repairs to do and need the money from my life

insurance. I don't have children so I figure I could use the money rather than let it go to the state. Let me know your thoughts.> AB>

[Guest guest]

Bob

Well, I copied that section directly from the IRS site so I think you

are confused over dividends collected when one dies versus cashing the

policy early. If the policy is collected at death, you are correct, but

if the policy is cashed in early for its cash value, then it is treated

more like any other investment.

But let me add something. The cash value of a life insurance policy is

very very very unlikely to equal what you have paid in. So, ultimately,

there is not likely to be any tax when you cash a policy you have

purchased in for cash value. So, although the regulations do say any

gain is taxable you're not likely to have a gain when cashing it in for

cash value.

> >

> > Sorry Income is Income is Income, except if it is on someone who

passed away.

> >

> > Dyane, 54, Phoenix, IIP 02 now NSIP 09, Breast Cancer, Psoriasis,

Lipodermatosclerosi s, Diabetes, and now a RA like autoimmune component,

yadda yadda yadda.

> >

> >

> > " Life is not a journey to the grave with intentions of arriving is a

pretty, well-preserved body, but rather to skid in broadside, thoroughly

used up, totally worn out, chocolate in one hand, Margaritas in the

other, loudly proclaiming " Holy **** What a ride! " . "

> >

> >

> >

> >

> >

> > ____________ _________ _________ __

> > From: Adrienne Bishop eggie5909@ .

> > To: Breathe-Support@ yahoogroups. com

> > Sent: Fri, January 22, 2010 4:20:06 PM

> > Subject: Life Insurance Cash Out

> >

> >

> > Does anyone know if you cash out a life insurance policy, do you

have to pay taxes. I need to sell my house but I have many repairs to do

and need the money from my life insurance. I don't have children so I

figure I could use the money rather than let it go to the state. Let me

know your thoughts.

> > AB

> >

>

[Guest guest]

We have discussed some of the options here and that is good. However, we

need to be very careful beyond that because with the complexities and

the differences for each person, what might be very wise for one person

could be very bad for another. Cashing life insurance, loans against it,

home equity loans, reverse mortgages, and collecting partial value early

as described can all be good options and can all be mistakes. To

determine which is best for you is going to take understanding your

personal finances far beyond what can be discussed here. Just consider

all options.

> >>

> >> Sorry Income is Income is Income, except if it is on someone

> > who passed away.

> >>

> >> Dyane, 54, Phoenix, IIP 02 now NSIP 09, Breast Cancer, Psoriasis,

Lipodermatosclerosi s, Diabetes, and now a RA like autoimmune component,

yadda yadda yadda.

> >>

> >>

> >> " Life is not a journey to the grave with intentions of arriving is

a pretty, well-preserved body, but rather to skid in broadside,

thoroughly used up, totally worn out, chocolate in one hand, Margaritas

in the other, loudly proclaiming " Holy **** What a ride! " . "

> >>

> >>

> >>

> >>

> >>

> >> ____________ _________ _________ __

> >> From: Adrienne Bishop eggie5909@ .

> >> To: Breathe-Support@ yahoogroups. com

> >> Sent: Fri, January 22, 2010 4:20:06 PM

> >> Subject: Life Insurance Cash Out

> >>

> >>

> >> Does anyone know if you cash out a life insurance policy, do you

have to pay taxes. I need to sell my house but I have many repairs to do

and need the money from my life

> > insurance. I don't have children so I figure I could use the money

rather than let it go to the state. Let me know your thoughts.

> >> AB

> >>

> >

>

[Guest guest]

talk to accountants

what other types of professionals should be spoked with

investment brokers???

lawyers???

any suggestions

Pink Joyce R (IPF 3/06) IFA 5/09 Pennsylvania

Donate Life Listed 1/09 Inactive 4/09

www.transplantfund.org---

Subject: Re: Life Insurance Cash OutTo: Breathe-Support Date: Friday, January 22, 2010, 10:10 PM

We have discussed some of the options here and that is good. However, weneed to be very careful beyond that because with the complexities andthe differences for each person, what might be very wise for one personcould be very bad for another. Cashing life insurance, loans against it,home equity loans, reverse mortgages, and collecting partial value earlyas described can all be good options and can all be mistakes. Todetermine which is best for you is going to take understanding yourpersonal finances far beyond what can be discussed here. Just considerall options.> >>> >> Sorry Income is Income is Income, except if it is on someone> > who passed away.> >>> >> Dyane, 54, Phoenix, IIP 02 now NSIP 09, Breast Cancer, Psoriasis,Lipodermatosclerosi s, Diabetes, and now a RA like autoimmune component,yadda yadda yadda.> >>> >>> >> "Life is not a journey to the grave with intentions of arriving isa pretty, well-preserved body, but rather to skid in

broadside,thoroughly used up, totally worn out, chocolate in one hand, Margaritasin the other, loudly proclaiming "Holy **** What a ride!"."> >>> >>> >>> >>> >>> >> ____________ _________ _________ __> >> From: Adrienne Bishop eggie5909@ .> >> To: Breathe-Support@ yahoogroups. com> >> Sent: Fri, January 22, 2010 4:20:06 PM> >> Subject: Life Insurance Cash Out> >>> >>> >> Does anyone know if you cash out a life insurance policy, do youhave to pay taxes. I need to sell my house but I have many repairs to doand need the money from my life> > insurance. I don't have children so I figure I could use the moneyrather than let it go to the state. Let me know your thoughts.> >> AB> >>>

>>

[Guest guest]

Pink

I think that depends on your situation and on the professionals you are

use to working with. ly, a lot of accountants wouldn't be

especially helpful in this but some would be. Generally for one who was

seeking one of these options investment brokers and lawyers probably

wouldn't be necessary. It's pretty much a matter of just putting on

paper all your options and looking at the pros and cons and doing some

sort of spreadsheet or something showing the cash flow of each. Talking

to a banker (about home equity, reverse mortgages etc), talking to an

insurance professional (about putting cash obtained into annuity) may

help in gathering information. However, each of these professionals by

nature may lean toward the product they deal with.

But generally I think once the information is gathered which would

include all these options then you can see what you are comfortable with

fairly fast.

Cashing in life insurance is generally a poor financial decision in

terms of the cash you receive versus the value of the policy upon your

death. However, for someone with no heirs or someone who is incapable of

affording the continued premium that changes. As someone mentioned, in

most circumstances, taking a policy loan is better but that does mean

you still have the premiums to pay going forward. On the other hand upon

your death the policy pays. If a policy has an accelerated benefit

option then its even more advantageous to hold on to, because in your

last year or so of life being able to access that may make things a lot

easier.

Home equity loans are tough if you're already in a financial pinch

because they add monthly payments. However, if your problem isn't month

to month but just the need of a larger amount now which you can pay

back, they make more sense. Reverse mortgages on the other hand created

income and reduce expenses on a monthly basis. But many get them and

think the money is going to go further than it does plus they can eat

away most of the equity of the home.

Each of our situations is so very different.

Lawyers come into play obviously if there is an estate of any size that

you're planning to leave. Investment brokers might if you had reasonable

wealth and needed investments but most of us are not in that position

plus most of the investment vehicles they offer are not appropriate

given our shorter life expectancies.

> > >>

> > >> Sorry Income is Income is Income, except if it is on someone

> > > who passed away.

> > >>

> > >> Dyane, 54, Phoenix, IIP 02 now NSIP 09, Breast Cancer, Psoriasis,

> Lipodermatosclerosi s, Diabetes, and now a RA like autoimmune

component,

> yadda yadda yadda.

> > >>

> > >>

> > >> " Life is not a journey to the grave with intentions of arriving

is

> a pretty, well-preserved body, but rather to skid in broadside,

> thoroughly used up, totally worn out, chocolate in one hand,

Margaritas

> in the other, loudly proclaiming " Holy **** What a ride! " . "

> > >>

> > >>

> > >>

> > >>

> > >>

> > >> ____________ _________ _________ __

> > >> From: Adrienne Bishop eggie5909@ .

> > >> To: Breathe-Support@ yahoogroups. com

> > >> Sent: Fri, January 22, 2010 4:20:06 PM

> > >> Subject: Life Insurance Cash Out

> > >>

> > >>

> > >> Does anyone know if you cash out a life insurance policy, do you

> have to pay taxes. I need to sell my house but I have many repairs to

do

> and need the money from my life

> > > insurance. I don't have children so I figure I could use the money

> rather than let it go to the state. Let me know your thoughts.

> > >> AB

> > >>

> > >

> >

>