When the IRS Wants Your Life Insurance Policy
Society has long recognized the individual’s obligations to provide for his or her family. Insurance was developed to protect against contingencies that might destroy or diminish one’s ability to meet those obligations.
To aid this objective, every state and the federal government sets limits to the rights of creditors to insurance where the debtor has not sought to use this approach merely to avoid payment of debts. Because insurance, particularly life insurance, has expanded beyond its social origins to become an important planning tool, financial planners need to be aware of these rules. The federal government has the right to collect unpaid policy-owner income taxes from life insurance policies. The government can also collect from disability payments, annuity contracts, joint returns and community property. Click here to read the full article.
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