Many people have money that is “stranded” in money market accounts, annuities1, or other vehicles that are no longer crediting an attractive interest rate. This is usually money you want to keep close at hand and you don’t want it to lose significant value.
A Life Insurance Solution
In addition to offering death benefit protection, an interest rate rescue uses permanent life insurance to “rescue” the stranded money. Permanent life insurance offers four key benefits:
1. Generally income tax free death benefit: Life insurance is designed to leverage funds into a larger death benefit and pass the proceeds generally income tax and probate free to beneficiaries.2
2. Control and access to funds: Life insurance can offer cash-value growth that is available for unexpected or immediate needs and taken as loans or withdrawals for any reason.3
3. Access to funds above and beyond cash surrender value: Additional design elements may include the ability to “accelerate” or access the death benefit during your lifetime when diagnosed with a qualifying illness.4
4. Competitive Performance: Life insurance provides immediate, generally tax-free proceeds in the event of death. It also offers the potential for strong cash-value growth.
Life insurance does come with Cost of Insurance (COIs) and other charges. Depending on funding, life insurance may not be able to guarantee avoiding loss of premium and early termination could result in surrender charges.
To find out how you can “rescue” your funds, contact your Midland National agent today!
1. Removing funds from an annuity may result in surrender charges and/or income taxes.
2. Neither Midland National nor its agents give legal or tax advice. Please consult with and rely on a qualified legal or tax advisor before entering into or paying additional premiums with respect to such arrangements.
3. Policy loans from life insurance policies generally are not subject to income tax, provided the contract is not a Modified Endowment Contract (MEC), as defined by Section 7702A of the Internal Revenue Code. A policy loan or withdrawal from a life insurance policy that is a MEC is taxable upon receipt to the extent cash value of the contract exceeds premium paid. Distributions from MECs are subject to federal income tax to the extent of the gain in the policy and taxable distributions are subject to a 10% additional tax prior to age 59½, with certain exceptions. Policy loans and withdrawals will reduce cash value and death benefit.
Policy loans are subject to interest charges. Consult with and rely on your tax advisor or attorney on your specific situation. Income and growth on accumulated cash values is generally taxable only upon withdrawal. Adverse tax consequences may result if withdrawals exceed premiums paid into the policy. Withdrawals or surrenders made during a Surrender Charge period will be subject to surrender charges and may reduce the ultimate death benefit and cash value. Surrender charges vary by product, issue age, sex, underwriting class, and policy year.
4. Subject to eligibility requirements. The actual payment received in connection with any acceleration will be discounted and is lower than the Death Benefit amount accelerated. In addition, there is an administrative fee required each time an election is made.