Features of IUL
As you can see from the name, people have the characteristics of universal life, but its biggest feature is that its cash value is linked to several major stock market indices (such as S&P, NASDAQ, Dow Jones, etc., and some products are linked to global indices, such as Hong Kong Hang Seng, European Wait). If the index rises, the interest will increase, and the cash value will also rise. Of course, if the index falls, the cash value will not rise, but it will not lose money. In addition, the cash value of the insurance can be withdrawn, or the policy loan can be used. In terms of taxation, it has designed an optimized structure. Even if there is interest, the interest can be deducted as investment interest expense when filing the tax return, and the insurance company will charge it. Relatively low management and operating costs.
When it comes to tax structure, of course we have to focus on it. When designing, IUL fully considers and follows Article 7702 of the US Tax Code, which is the definition of life insurance, so as to design a life insurance with the most favorable tax structure. Therefore, the death compensation also complies with the provisions of Section 101 of the US tax law and is exempt from personal income tax.
About inheritance tax: We know that the United States is a country with inheritance and gift taxes. For American taxpayers, at the federal level, life insurance will still be included in the inheritance assets of the deceased, and face the question of whether the total assets exceed the lifetime tax exemption of inheritance tax and thus have inheritance tax. But this is only levied on U.S. residents, and the current exemption is as high as $11 million. For foreigners, there is no estate tax issue at all.
In addition, life insurance is determined at different stages such as purchase link, cash withdrawal, loan, withdrawal, surrender, loss, annuity conversion, death claim, terminally ill long-term care, especially when it is withdrawn to determine whether there is a federal tax code 7702A definition The MEC, in the US tax law and tax filing, has very detailed regulations and different analyses, and cannot be generalized.
The IUL insurance design is very flexible, and some insurance companies also add functions such as critical illness and long-term care, which are more intimate and user-friendly.
Who is suitable for buying IUL?
Index insurance IUL is a life insurance after all and can accumulate cash value over a longer period of time. Young and strong, in good health, and the cost of insurance is low. However, if you’re going to accumulate cash value primarily through it, you’ll have to have a long-term investment in mind, after all, the cash value will be less in the first few years. If you want to save a child’s education fund through IUL, it is best to buy IUL when the child is about 4 years old, so that there will be continuous growth for more than 10 years. Usually, everyone borrows money for children to read when they are studying. First, There is no income tax, and the second is that this kind of borrowing and insurance assets does not affect the child’s asset declaration when applying for federal grants such as FAFSA, and the effect is still very good.
Should non-US investors buy IUL?
At present, many insurance companies provide channels for foreigners to purchase. But a safety-first insurer still has some requirements:
1. The policyholder must complete a life insurance application form in the United States
2. The insured needs to have a free door-to-door physical examination by specialized medical personnel in the United States. The content is blood test, urine test and blood pressure measurement. The physical examination result can be obtained within a week at the earliest.
3. Depending on the age and health of the insured, the insurance company may request medical records from the country. The insurance company will be responsible for the translation.