In the December 2020 budget bill, Congress included a small change to IRS section 7702, which relates to the tax-favored status of Life Insurance contracts. In a nutshell, the change allows for more money to be contributed and saved within a permanent policy, and thereby grow tax-deferred, and potentially accessed tax-free.
If you would like a more complete treatise on the matter, this article from the “Society of Actuaries” is fairly comprehensive.
This does only affect policies issued in 2021. If you have an older policy, you should consult with a knowledgeable life insurance agent if you are interested in taking advantage of the change through a 1035 exchange. Because the change has greater impact the longer a policy is held, this change may benefit the youngest insured persons. For example, parents and grandparents funding juvenile policies would likely see the greatest benefit, as would younger adults.
Permanent life insurance (Whole & Universal Life) has been used for years to accumulate wealth that can be accessed tax-free. If you are interested in learning more, schedule some time with me. We can discuss this topic to whatever depth you are interested in.
Schedule an introductory strategy session with me via my calendar: https://Calendly.com/Southard
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