How to Avoid Transfer for Value Problems for Business Uses of Joint Life (First to Die) LIfe Insurance

How to Avoid Transfer for Value Problems for Business Uses of Joint Life (First to Die) LIfe Insurance

The transfer for value rule essentially says that death benefits will be subject to income tax to the extent they exceed the consideration paid for the policy if the policy has been transferred for valuable consideration. The question arises after the first death whether the increase each shareholder now has in the death benefit payable on the next to die (assuming, of course, that the trust exercises options to keep an equivalent JL coverage on…

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Business Uses of Joint Life (First to Die) Life Insurance

Business Uses of Joint Life (First to Die) Life Insurance

Proper planning of ownership and other policy rights is always an important concern with any life insurance policy to insure the most advantageous treatment for income, gift, and estate tax purposes. Ownership issues are generally not problematic in family situations as long as the husband and wife are the insureds and beneficiaries of the other’s death benefit. Major ownership concerns arise when three distinct parties are involved as insured, owner, and beneficiary. For example, assume…

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How to Select the Best Joint Life (First to Die) Life Insurance Policy

How to Select the Best Joint Life (First to Die) Life Insurance Policy

As with any type of insurance policy, the insurer’s ability to pay as measured by its financial strength and stability is a critical element in the selection process. (See Chapter 3, “How to Determine the Right Company,” for a discussion of this issue.) Otherwise, the best policy is the one that has the combination of features desired at the lowest overall cost.  The basic plan of insurance will greatly affect the schedule of premiums and…

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Alternatives to Joint Life (First to Die) Life Insurance

Alternatives to Joint Life (First to Die) Life Insurance

The principal alternative for a Joint Life (JL) policy is separate single-life policies on each insured. If the need for insurance terminates at the first death, JL is the more cost-effective method of insuring the risk. If the need for insurance on the survivors will continue after the first death, often separate policies on each insured or some combination of JL and survivorship life might be a better alternative. If the need for insurance on…

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Tax Implications of Joint Life (First to Die) LIfe Insurance

Tax Implications of Joint Life (First to Die) LIfe Insurance

Taxes come in many forms, even in life insurance. This article breaks down the taxes involved with Joint Life (JL) policies that should be considered before purchasing this kind of policy. General Income Taxation JL is taxed in the same manner as other life insurance for income tax purposes. Death benefits are generally received income tax-free. As long as the policy is not classified as a Modified Endowment Contract (MEC), cash values build without current…

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Advantages and Disadvantages of Joint Life (First to Die) LIfe Insurance

Advantages and Disadvantages of Joint Life (First to Die) LIfe Insurance

Understanding the advantages and disadvantages of Joint Life (JL) can help any consumer make a more educated decision of what policy works best for them. This article gives a breakdown of each. Advantages In the family market, a JL/SL combination may provide a more cost-effective match with insurance needs than two separate single-life policies on the spouses. In the business insurance market, JL may eliminate the need for redundant coverage when the need is simply…

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When to Use Joint Life (First to Die) Life Insurance

When to Use Joint Life (First to Die) Life Insurance

In the dual-income family market – Joint Life (JL) may provide a cost-effective means of replacing income at the first spouse’s death. Advisers often recommend joint life to fund specific goals and objectives that depend on the presence of the second of two incomes because the family frequently needs insurance at the second death even more than at the first death. For example, a family might use a JL policy to pay off a mortgage…

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What is Joint Life (First to Die) Life Insurance?

What is Joint Life (First to Die) Life Insurance?

Understanding Joint Life (JL) insurance, which is sometimes called multi-life insurance, begins with its purpose of first-to-die coverage on two or more insureds. Insurers have offered joint life coverage in many forms, including base policies of permanent or term insurance or Additional Insured Riders (AIRs) to single life policies. Typically, planners have used traditional whole life, current assumption life, or universal life when designing permanent plans. In recent years, the demand for joint life base…

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