Whole Life Insurance
Whole life insurance is basically what is known as “permanent level” insurance protection for the “whole of life” from policy issue to the death of the insured. Basically such a policy is characterized by level premiums, benefits and cash surrender values. The cash surrender value represents a portion of one’s premium (paid on a periodic basis to the insurance carrier) which then accumulates in a separate cash account. The cash value may be withdrawn, or borrowed if needed, under certain circumstances.
Although life insurance is a field apart from public accounting and income taxes, there are some key factors common to each. Life insurance proceeds are not taxable to the beneficiary. They are immediately includable in the estate of the deceased, however, unless the beneficiary is properly designated (for example, it may be beneficial to establish a trust). These issues are complex and could affect your income taxes.