Author Topic: Transferring Universal Life Insurance  (Read 1126 times)

bteach

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Transferring Universal Life Insurance
« on: June 28, 2018, 09:47:43 AM »
My wife and I have Universal Life Insurance policies that have accrued money that I am considering transferring to other types of accounts. What types of accounts are available that would avoid tax penalties? Ideally, I can transfer to my Vanguard Index funds, but not sure if that type of account would work or it needs to be an IRA or similar. Any advice would be appreciated!

KeithTax

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Re: Transferring Universal Life Insurance
« Reply #1 on: July 03, 2018, 12:23:18 PM »
You can 1035 to another insurance product only. UL has lots of tax promises, but when the insurance company gets done feeing you to death, taxes seem like an awesome deal. The problem isn't with the investments in UL products (okay, it's still a problem). An index fund in a UL product still gets killed by the insurance company fees.

You can replace a life insurance policy with another life insurance policy, endowment policy or annuity. Any other transfer will not be a tax-free exchange.

Your original money is probably after-tax so the tax hit to surrender may be small. Double check to avoid surprises. The tax and surrender fee may be the lesser of two evils. Long-term fees never stop with these things so biting the bullet now is a valid option to consider.

bteach

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Re: Transferring Universal Life Insurance
« Reply #2 on: September 27, 2018, 10:29:12 PM »
Thanks for the advice. I've stopped contributions to these accounts and may just bite the bullet and get out of UL completely. Financial goals have changed since we started those accounts so there isn't the need anymore. Better to get out of those killer fees now!