Life's Tax Advantages

Katt, Peter C.
November 2005
Journal of Financial Planning;Nov2005, Vol. 18 Issue 11, p32
Academic Journal
This article describes the exceptional income tax characteristics of life insurance and highlights three situations where the tax advantages can benefit financial planning clients. The three situations discussed include life insurance used for the dual purpose of protection and investment, life insurance as being no longer needed, and a tax-free bond alternative to life insurance. According to the author, the tendency for financial planners to press their clients to convert tax-deferred assets or divert tax deductible qualified plan contributions to life insurance premiums based on the argument that cash values are tax-deferred is inappropriate. He also notes that the income tax advantage of life insurance makes it a much better asset once it has been restructured, rather than selling to a life settlement firm.


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