Direct and indirect changes create new and interesting life insurance planning opportunities.
The Tax Cuts and Jobs Act was signed into law by President Trump on December 22, 2017. The Act brings direct changes to the tax treatment of insurance and significant indirect changes to planning with life insurance. These changes present new and interesting life insurance planning opportunities. Here, we detail the direct and indirect changes. A future article will cover the insurance planning opportunities.
Direct Changes
The Act imposes reporting requirements in the case of the purchase of an existing life insurance contract in a reportable policy sale and imposes reporting requirements on the payor in the case of the payment of reportable death benefits. These reporting requirements apply to every person who acquires a life insurance contract, or any interest in a life insurance contract, in a reportable policy sale during the taxable year. A reportable policy sale is the acquisition of an interest in a life insurance contract, directly or indirectly, if the acquirer has no substantial family, business or financial relationship with the insured (apart from the acquirer’s interest in the life insurance contract). An indirect acquisition includes the acquisition of an interest in a partnership, trust or other entity that holds an interest in the life insurance contract.
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