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Business pays life insurance
originally posted: 11/22/2006
reposted: 2/18/2011 This post has not
been recently reviewed or revised by the author and may be out of date.
If you notice an error or are in doubt, please send a new question by
email or ask for an update. Email asktony@tonynovak.com.
Q: I have a business loan where
the bank requires me to have life insurance. I pay it as a business
expense. You said that makes the benefit taxable. Can the life
insurance payment be both tax deductible and tax free?
A: Life insurance proceeds are
tax-free if paid to a business. A better approach is to has a person
(your spouse, for example) be the owner and beneficiary of the policy
and then execute a
collateral assignment for the amount of the loan. Just check the
"collateral assignment" box when applying online. There is no
additional charge and the insurer will handle this legal paperwork as
part of the policy issue. Tax treatment may depend on the amounts of
insurance involved.
Summary
More resources:
OnlineAdviser life insurance service request
