In participating whole life, death benefits and
cash values are guaranteed, and the resulting profits are distributed among the policyholders as dividends.
If the plan is to use policy
cash values for living needs, the policyowner will want to avoid MEC status.
Unlike many other products, participating whole life insurance offers three important guarantees: a guaranteed, level premium that will not increase for the life of the contract; guaranteed
cash values and nonguaranteed dividends that accumulate on a tax-deferred basis and can be accessed through loans throughout the policyholder's lifetime; and a guaranteed death benefit to beneficiaries, which is usually income tax-free.
Finally, withdrawals may also be used to access
cash values.
While term insurance can provide a lot of protection for a lesser cost, it builds no
cash values and has no permanent values.
Whole life
cash values have been one of the best performing asset categories for the last ten years and that will continue.
To identify plan abuses, the IRS is looking at the use of "springing
cash values," which occurs when a plan makes large initial payments on its insurance contracts, then the plan is terminated and the contracts transferred to plan participants.
Based on this narrow view it's no wonder so many CPAs fall into the trap of agreeing to allow unneeded policies to lapse or be surrendered for just their
cash values.
Major capital improvement projects such as Central Park and road and bridge construction have prevented the city from making more investments, city officials said, noting that
cash values of all investment funds peaked in July of 1999 with $60 million.
If you must buy a cash-value policy, universal life is cheaper than whole life and builds
cash values sooner.
All capital gains and losses from those funds pass through to the policy's
cash values.
L99 is an excellent choice to maximize long-term performance and deliver significantly high
cash values after 20 years or more.
