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How to Avoid Taxes on Life and Disability Insurance

LongIsland.com

Insurance for life and disability should be something the investor and his dependents can count on in the case of death or loss of faculties.

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Insurance for life and disability should be something the investor and his dependents can count on in the case of death or loss of faculties. With help from insurance experts at Term vs. Annuity Insurance, that is the norm and not the exception. Term vs. Annuity Insurance offers an easy way to compare the cost with a life insurance quote from several life insurance companies at one time. This makes the task to life insurance compare less daunting and saves time and money.

Term vs. Annuity Insurance website (www.termvsannuityinsurance.com) offers information at the click of a mouse. Articles written by knowledgeable authors of financial services inform the consumer about financial topics from tax issues to estate planning, joint and single annuities, and the basics about life and impaired life annuities, plus many other topics. With this information consumers can make an informed decision about the best type of coverage for their family. With a few keystrokes, a life insurance quote is moments away. Term vs. Annuity Insurance prepares a life and disability insurance quote after a thorough comparison of insurance of all the major insurance providers for you.

Life Insurance and How to Avoid Taxes on Death Benefits
The purpose of life insurance is to impart financial security to a surviving spouse and/or family in the case of the untimely death of the primary wage earner of the family. Death benefit payments are paid to survivors, designated as policy beneficiaries, free of any federal and state income tax. Federal and State estate tax takes an entirely different approach on taxing life insurance benefits, viewing the death benefit as a part of the estate of the deceased.

If the policy holder was the owner of the policy, meaning they retained the power to change policy beneficiaries, coverage amounts and cancellation privileges to the time of their death, then the death benefit must be included in the taxable estate. The exception is when the death benefit is paid directly to the surviving spouse. All other beneficiaries should expect a tax bill of 30 to 40 percent to cover federal and state estate tax due on the death benefit.

The establishment of an irrevocable life insurance trust as the owner of the life insurance policy is the solution to avoiding federal and state estate tax. The established trust is the owner and pays the premiums. This makes any named beneficiary exempt from federal estate tax on death benefits, plus exemption from federal income tax.

Disability Insurance and How to Avoid Taxes on Disability Benefits
Disability insurance insures the earned income of a policyholder against the risk of a disabling illness or condition which would make working and earning no longer an option. Disability insurance pays out for temporary sick leaves, short term disability (STD) or long term disability (LTD) benefits to the policyholder or their designated caregiver in behalf of the policyholder. STD and LTD benefits are usually capped at 60% of the usual income of the policy holder, so a wage earner making $5000 a month would be eligible for $3000 a month disability benefit. LTD and STD benefits are taxable by federal and state income agencies if the premiums of the disability policy were paid by the employer. It would be better for employees to pay premiums from after-tax dollars withheld from their salary. This increases the employee's income tax bill, but provides for tax-free LTD benefits in the case of a debilitating injury or illness. Another alternative is investing in a personal LTD policy. All benefits from this LTD policy would be tax free and provide extra coverage to cover federal and state income tax on disability benefits provided by an employer.

For more information on how life insurance compare and rapid quotes visit Term vs. Annuity Insurance website (www.termvsannuityinsurance.com) today. Future financial planning is important and Term vs. Annuity is a click away from assuring you and your family with financial stability, no matter what the future holds.

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