The blended interest rate used to calculate taxable income on demand loan split dollar plans is falling to a historic low 0.82%. The new rate, effective from July 1, 2009 until June 30, 2010, makes those plans less expensive than ever before.
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Most people think life insurance is income tax-free. That is not the general rule for business life insurance that falls under rules Congress created in 2006. To keep it tax-free, you must first meet certain notice and consent requirements. Even then, the insurance can still be taxed if it is not paid in a way that satisfies one of the four ’safe harbors’ described in this article. Earlier we reported the administration’s proposed changes to the estate tax laws. This article delves deeper to look at how proposals offered by the administration and in several Congressional bills, might affect common estate planning tools and techniques. Late last week the IRS provided some answers to questions about the 2006 law that taxes most of the death benefit of business-owned life insurance. IRS Notice 2009-48 answers many questions. It leaves others unanswered and raises yet others. If you own or advise a business, it’s important to know what employer-owned life insurance is and the rules you need to follow to keep the death benefit income-tax free. “When you’re in trouble, ask a question,” Roger Zener taught. Here’s a true story that shows how effective that can be in a sales interview. The principle, however, applies to almost any human interaction. In 1986, Roger lured me out of a private practice of law in Eugene, Oregon to join him in the Advanced Marketing [...] Pooh and Piglet can teach us all a lesson about making sure we don’t let the tools we use dictate the things we really want to do. (With special thanks to all the fans of Winnie the Pooh!) Pooh Bear was talking with his friend Piglet in the hundred acre wood. “Piglet, I am so excited. I [...] [Update: The IRS on May 22, 2009, released Notice 2009-48 that provides answers to many questions about employer-owned life insurance. See the article on this website for analysis of that Notice.] This article answers common questions about the Notice and Consent requirements you must satisfy to avoid paying tax on employer-owned life insurance. The last 5 [...] The White House Monday afternoon announced another $59 billion in tax increases to help pay for its health insurance proposals. Three proposed changes affecting life insurance policies popped out at us. Treasury’s Office of Tax Policy summarizes the tax increases in the “2009 Green Book”, its General Explanations of the Administration’s Fiscal Year 2010 Revenue Proposals. [...] Why do financially successful people buy life insurance? It may surprise you that the answer has little to do with costs. “Discounted dollars” – while having a lot of sizzle – is not the real reason people use life insurance. Consider someone who has managed to build (and, in today’s economic climate, preserve) a comfortable net [...] The IRS released on May 1, 2009, two Revenue Rulings dealing with how life insurance policies are taxed when they are surrendered or sold to an investor. The rulings mention both cash-value contracts and term contracts. The first ruling deals with how the original owner of the policy is taxed. The second deals with how [...] True or false? Life insurance is tax-free. The general income tax rule is that money received from life insurance when the insured dies is not taxable income (though it may be subject to state and federal death taxes). Congress, however, always likes exceptions to the rule and, in 2006, they created one huge exception to this [...] Consider an orange. Each part of the orange is worth more – or less – to different people. To some the juice is all that’s important. Others find the greatest value in the seeds. Yet others swear up and down that the skin of the orange is most valuable. As long as each gets what [...] As it does each year, the IRS has released its Dirty Dozen – the top tax scams taxpayers should be aware of. This year the IRS has included a 30-second video on YouTube warning: “If it seems too good to be true, ask a reputable tax advisor or go to www.irs.gov.” Unfortunately, after watching the [...] When the grandchildren are small and birthdays or holidays roll around, Grandma (and it usually is Grandma) makes sure the little ones get something – usually clothes or a toy. And tucked in with the gift itself there’s almost a card and a note expressing love. As the grandkids get older and family gets spread out [...] Senate Finance Committee Chairman Max Baucus (D-MT) introduced legislation (S. 722) the end of March to make “permanent” many of the tax cuts passed in 2001. While the bill also includes changes affecting income taxes, this article focuses on the estate and gift tax terms. (Anyone who has studied changes in tax law understands that “permanent” means anything but permanent.) If you die in 2009, the estate tax exemption is $3.5 million and the top rate after that is 45%. In other words, if your estate is under $3.5 million, you pay no estate tax. If it’s more $3.5 million, the tax on everything over $3.5 million is 45%. Under current law, the estate tax disappears in 2010 and then reappears in 2011 with a $600,000 exemption and a 55% top rate. |
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