Any accountants around?

[ZackyBoy]

I was just wondering; I am a full time student who has a yearly income very, very low. I recently took out a loan on my life insurance policy (the ones where you the policy will pay the interest until collapse and you never pay or whatever... I don't know the specifics).

The broker told me that it's in my best interest to pay it back (I am not going to... I don't even have the means to) otherwise I could be taxed. This seems pretty ******* stupid to me considering I don't even earn an income. Anyone have any enlightening information as to whether i'll have to pay something?

 

[Milhouse]

Perhaps you should find out the specifics.

 

[IUtoSLU]

You are the reason why our economy tanked. You took out a loan without really knowing/understanding the consequences or specifics. Yikes.

 

[ZackyBoy]

Originally Posted by IUtoSLU

You are the reason why our economy tanked. You took out a loan without really knowing/understanding the consequences or specifics. Yikes.
No... I am really not. The loan is taken out against the policy of life insurance, which has been paid since I was born. If I choose to repay the loan, the life insurance policy remains in place; if not, the worth of the policy is eventually swallowed and I am not insured and I re-apply. I plan to simply re-apply at an age that it becomes necessary. My question was relating to the tax side. The policy was created for the very reason of using the cash value to finish paying for my university. I guess I should have just said I don't care to detail the specifics. You answered a post without having a clue what I was talking about and passed judgment without any base. Yikes. I just assumed people were familiar with insurance cash outs.

 

[Flambeur]

Originally Posted by Milhouse

Perhaps you should find out the specifics.
seriously

 

[ZackyBoy]

Originally Posted by Flambeur

seriously

Read my last post. The real question is: What is the tax consequence of receiving 15000 free when you have no income.

 

[Thomas]

Originally Posted by ZackyBoy

Read my last post. The real question is:

What is the tax consequence of receiving 15000 free when you have no income.

I don't know the particulars, but here's one scenario to consider: The 15,000 is income: it can be considered a distribution/advance against your life insurance. If you pay it back in the same year in which you withdrew it, then you're transaction nets to zero.

Otherwise, you've got to claim it as income. Maybe you can deduct it away with expenses and credits, in which case you should be covered.

Now, the insurance may have other provisions for payback and whatnot, or it may be considered a loan, I can't give you anything more to go on without knowing more about the particulars. PM me if you like.

 

[ama]

Why are you financing your college education with insurance payouts that tax you progressively higher every year?

 

[ZackyBoy]

Originally Posted by ama

Why are you financing your college education with insurance payouts that tax you progressively higher every year?

Tax me higher every year? The payout is a one time payout. And as for your question...

A) 1 time payout, possible taxation.

B) Student loan, interest, debt.

Kind of a no brainer.

 

[ZackyBoy]

Originally Posted by Thomas

I don't know the particulars, but here's one scenario to consider: The 15,000 is income: it can be considered a distribution/advance against your life insurance. If you pay it back in the same year in which you withdrew it, then you're transaction nets to zero.

Otherwise, you've got to claim it as income. Maybe you can deduct it away with expenses and credits, in which case you should be covered.

Now, the insurance may have other provisions for payback and whatnot, or it may be considered a loan, I can't give you anything more to go on without knowing more about the particulars. PM me if you like.

I am actually pretty educated on the option of repayment I just didn't word "I don't want to elaborate" correctly. Your information is helpful though. I just didn't know what to consider it.. income etc.

 

[ama]

Originally Posted by ZackyBoy

Tax me higher every year? The payout is a one time payout. And as for your question...

A) 1 time payout, possible taxation.

B) Student loan, interest, debt.

Kind of a no brainer.

Originally Posted by ZackyBoy

I am actually pretty educated on the option of repayment I just didn't word "I don't want to elaborate" correctly. Your information is helpful though. I just didn't know what to consider it.. income etc.

Tax rates go up yearly and inflation decreases the value of the dollar. The money you put in was not taxed as highly as the money you are took out. There is a reason why people finance education with student loans and not insurance payouts...

Also, as nearly everyone here has told you, a payout on virtually every investment, including insurance, is taxable income. So get ready to get taxed on it at a pretty high percentage, I hope you have some left.

 

[unjung]

I would assume that the money you're taking out is considered investment income.