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  • Surrender Life insurance?

    I surrendered a whole life policy... total loss of ~7k. I have a check for 5k... I re-read the How to dump your policy article (and comments!).

    Am I out of luck to either claim a loss, or wait for a VA to grow if I didn't have the funds rolled into a VA directly, prior to "surrender" and receiving a check??

  • #2
    Sorry, yes, substance over form in this situation. Just as with a 1031 exchange of realty, you cannot sell and then buy a piece of property and count the process as an exchange. (I get that question a lot.) Actually, for such a "small" transaction, I'd rather not be stuck in a VA. No loss deduction, either, but a small price to pay for a good lesson in the overall scheme of your financial life.

    This is an instance where the step transaction doctrine could apply in your favor, but I don't recommend taking it to court  
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      congrats on moving forward!

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      • #4
        @Rex may be on to something - definitely worth a try if you want to go the annuity route.
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #5
          Thanks for the thoughts folks. Appreciate it. Moved forward indeed!

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          • #6
            i have an old VUL policy that my parents had for me. I no longer contribute to it. Have about a $10k gain over the basis. I dont want to pay taxes on it. Would appreciate thoughts on what to do with it. Tried to reduce the costs as much as possible, but is converting to a Vanguard variable annuity better vs just holding it vs surrendering it and paying the taxes.

             

            Thanks

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            • #7
              Rex,

              Thanks for the advice. I do have 30 year term life in place, plus some additional employer coverage. The additional insurance amount from the VUL is only a small amount compared to my other coverage. I have read the options that WCI listed in the article linked above and he seems to imply that if you have had it for a long time, it may actually be not bad returns as opposed to the horrible (negative) returns of the policy in the early years. However you are right that the insurance costs rise significantly as you get older and that will eat away at any gains I would have and the policy would lapse.

              Interesting point about increasing taxes on the annuity at a later date as this is deferred income, not capital gains. I guess I will hold on for one more year with the hopes that there maybe decreased tax rates in the near future.

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              • #8


                If it were me, id make sure i had term in place then surrender for simplicity.
                Click to expand...


                Over time, simplicity has become is worth more and more to me.

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