Life Insurance Tax Rules 2026: Complete Guide to Tax-Free Benefits, Policy Loans, and Avoiding MEC Status

Published: June 23, 2026 | Category: Life Insurance | Reading Time: 16 minutes

Life insurance is one of the most tax-advantaged financial products available to American consumers — but only if you understand the rules. The Internal Revenue Code grants life insurance policies a unique trifecta of tax benefits: tax-free death benefits, tax-deferred cash value growth, and tax-advantaged withdrawals (when structured correctly). However, these benefits come with strict guardrails. Cross them — particularly by overfunding a policy — and you can trigger Modified Endowment Contract (MEC) status, which strips away the most valuable tax advantages and subjects your withdrawals to ordinary income tax plus a 10% penalty.

In 2026, with interest rates stabilizing and the IRS continuing to enforce IRC Sections 7702 and 7702A with precision, understanding life insurance taxation is more important than ever. Whether you’re purchasing a new policy, managing an existing one, or planning your estate, this comprehensive guide covers every major tax rule you need to know — from the foundational tax-free death benefit to the nuanced mechanics of the 7-pay test, policy loans, 1035 exchanges, and estate tax planning strategies.

Why Life Insurance Gets Special Tax Treatment

Life insurance occupies a privileged position in the U.S. tax code for a straightforward policy reason: Congress wants to encourage Americans to protect their families financially. The tax benefits are codified in multiple sections of the Internal Revenue Code, each addressing a different aspect of how life insurance interacts with the tax system:

• IRC Section 101(a) — Death benefits paid to beneficiaries are generally excluded from gross income, meaning they are received 100% income-tax-free.
• IRC Section 7702 — Defines what qualifies as a “life insurance contract” for tax purposes, establishing the cash value accumulation test (CVAT) and guideline premium test (GPT).
• IRC Section 7702A — Defines Modified Endowment Contracts and the 7-pay test that determines MEC status.
• IRC Section 72(e) — Governs the taxation of amounts received under life insurance contracts (withdrawals, partial surrenders).
• IRC Section 1035 — Allows tax-free exchanges of life insurance policies, annuities, and certain other insurance products.
• IRC Section 2042 — Addresses the inclusion of life insurance proceeds in the gross estate for federal estate tax purposes.

These provisions work together to create a framework where life insurance can serve as both a protection tool and a wealth accumulation vehicle — but only when you stay within the lines Congress has drawn. Let’s examine each major tax rule in detail.

The Tax-Free Death Benefit: IRC Section 101(a)

The cornerstone of life insurance taxation is simple and powerful: death benefits paid to a named beneficiary are received free of federal income tax. Whether the policy is a $50,000 term policy or a $10 million permanent policy, the proceeds pass to your beneficiaries without a single dollar going to the IRS. This rule applies regardless of the policy type — term, whole life, universal life, indexed universal life, or variable universal life.

There are, however, important exceptions and nuances to be aware of:

Transfer-for-Value Rule

If a life insurance policy is transferred for valuable consideration (sold or assigned in exchange for something of value), the death benefit may become partially taxable to the new owner. The tax-free portion is limited to the consideration paid plus any subsequent premiums. The balance of the death benefit becomes taxable as ordinary income. This rule has several exceptions — transfers to the insured, a partner of the insured, a partnership in which the insured is a partner, or a corporation in which the insured is a shareholder or officer are exempt.

Employer-Owned Life Insurance

When an employer owns a policy on an employee’s life (often called COLI — corporate-owned life insurance), special notice and consent requirements under IRC Section 101(j) must be met. The employee must be notified in writing and provide written consent before the policy is issued. Without proper compliance, the death benefit may be taxable to the employer.

Interest on Installment Payouts

While the death benefit principal is tax-free, any interest earned on proceeds held by the insurance company and paid out in installments is taxable as ordinary income. For example, if a $500,000 death benefit is left with the insurer and paid out over 10 years with interest, the $500,000 principal remains tax-free, but the interest portion is reportable income to the beneficiary.

Cash Value Growth: Tax-Deferred Accumulation

Permanent life insurance policies — whole life, universal life, indexed universal life, and variable universal life — build cash value over time. This cash value grows on a tax-deferred basis, meaning you do not pay taxes on the growth each year as you would with a taxable brokerage account or savings account. The internal buildup of cash value is not currently taxable to the policyowner, allowing the money to compound without the drag of annual taxation.

This tax-deferred growth is one of the primary reasons high-income earners use permanent life insurance as a supplemental retirement savings vehicle. Consider this comparison:

The tax-deferred nature of cash value growth becomes increasingly valuable over long time horizons. Over 20, 30, or 40 years, the compounding effect of avoiding annual tax drag can result in significantly higher accumulated values compared to a taxable alternative — especially for policyowners in the 32%, 35%, or 37% marginal tax brackets.

Withdrawals and Policy Loans: The FIFO Advantage

For non-MEC life insurance policies, withdrawals and policy loans enjoy favorable tax treatment under the “first-in, first-out” (FIFO) accounting method. This is one of the most powerful — and most misunderstood — tax features of cash value life insurance.

FIFO Withdrawal Rules (Non-MEC Policies)

Under FIFO treatment, when you withdraw cash from a non-MEC policy, the IRS considers you to be taking out your cost basis first — that is, the total premiums you’ve paid into the policy. Only after you’ve withdrawn an amount equal to your total premium payments do subsequent withdrawals become taxable as ordinary income.

Example: You’ve paid $100,000 in total premiums into a whole life policy over 15 years. The cash value has grown to $180,000 ($100,000 basis + $80,000 gain). You withdraw $120,000:

1. The first $100,000 is a return of your cost basis — completely tax-free.
2. The remaining $20,000 is a distribution of gain — taxable as ordinary income.

This FIFO treatment allows policyowners to access a substantial portion of their cash value without triggering immediate taxation, making life insurance an attractive vehicle for supplemental retirement income, college funding, or emergency liquidity.

Policy Loans: Tax-Free Access to Cash Value

Policy loans represent another tax-advantaged way to access cash value. When you borrow against your policy’s cash value, the loan proceeds are not treated as taxable income — they are a loan, not a distribution. The insurance company charges interest on the loan (typically 5% to 8% in 2026, depending on the policy type and carrier), but you’re essentially borrowing your own money with the policy’s cash value serving as collateral.

Key considerations for policy loans:

• Loan interest is not tax-deductible in most cases (unlike mortgage interest or margin loan interest in some circumstances).
• Unpaid loan balance plus accrued interest is deducted from the death benefit if the insured dies with an outstanding loan.
• If a policy lapses or is surrendered with an outstanding loan, the loan amount in excess of cost basis is treated as taxable income — this can create a surprise tax bill, sometimes called “phantom income.”
• Direct recognition vs. non-direct recognition — some carriers reduce the dividend crediting rate on borrowed funds (direct recognition), while others do not (non-direct recognition). This affects the net cost of borrowing.

Modified Endowment Contract (MEC): When Tax Benefits Disappear

A Modified Endowment Contract (MEC) is a permanent life insurance policy that has been funded with premiums exceeding the federal tax limits established by IRC Section 7702A. Once a policy crosses the MEC threshold, it permanently loses the favorable FIFO tax treatment described above — and the consequences are significant.

The 7-Pay Test

The 7-pay test is the mechanism the IRS uses to determine whether a life insurance policy has become a MEC. It calculates the maximum annual premium that would be required to pay up the policy in seven level annual payments, based on the policy’s death benefit, the insured’s age, and the mortality and expense charges built into the contract.

If the cumulative premiums paid at any point during the first seven policy years exceed the cumulative 7-pay limit, the policy becomes a MEC — and the status is irreversible. There is no way to “un-MEC” a policy once it crosses the threshold.

The 7-pay test is applied each year during the first seven policy years. After the seven-year testing period ends, the policy can never become a MEC from premium payments alone — unless a material change occurs (discussed below).

MEC Tax Treatment: LIFO and the 10% Penalty

Once a policy is classified as a MEC, the tax treatment flips dramatically:

The LIFO (last-in, first-out) treatment means that every dollar you withdraw from a MEC is considered to come from earnings first — the gain inside the policy — until all gain has been exhausted. Only after all gain has been distributed do subsequent withdrawals become a tax-free return of basis. This is the exact opposite of the favorable FIFO treatment non-MEC policies enjoy.

Material Changes That Trigger a New 7-Pay Test

Even after the initial seven-year testing period has passed, certain material changes to a life insurance policy can trigger a new 7-pay test, potentially causing the policy to become a MEC years or even decades after issuance. Material changes include:

• Increasing the death benefit — any increase in the face amount triggers a new 7-pay test for the increased portion.
• Adding a rider that provides additional benefits (e.g., a paid-up additions rider, a term rider, or a long-term care rider) may trigger a new test.
• Reducing the death benefit during the first seven years can also trigger a recalculation.
• Changing the policy’s classification — for example, converting a term policy to a permanent policy.
• Exchanging the policy via a 1035 exchange — the new policy starts a fresh 7-pay test period.

Policyowners considering any modification to an existing permanent life insurance policy should consult with their insurance carrier or a qualified tax professional to determine whether the change will trigger a new 7-pay test and potentially MEC status.

How to Avoid Triggering MEC Status

Preventing MEC status is primarily about premium discipline during the first seven policy years. Here are the key strategies:

1. Request a 7-pay premium illustration from your agent or carrier before purchasing a permanent policy. This illustration will show the maximum annual premium you can pay without triggering MEC status.
2. Design the policy with a higher death benefit relative to the premium you intend to pay. A larger death benefit increases the 7-pay limit, giving you more room to fund the policy without crossing the MEC threshold.
3. Use a “blend” of term and permanent insurance — combining a base whole life policy with a term rider increases the total death benefit (and thus the 7-pay limit) while keeping the permanent portion manageable.
4. Spread large premium payments over multiple years rather than making a single large dump-in during the first seven years.
5. Consider a 1035 exchange of an existing policy into a new one designed to accommodate your desired premium level without MEC risk.
6. Monitor cumulative premiums annually during the first seven years — your carrier can provide a running tally of cumulative premiums paid vs. cumulative 7-pay limit.
7. Be cautious with paid-up additions (PUA) riders — while PUAs are an excellent way to build cash value, they count toward the 7-pay test and can inadvertently push a policy into MEC territory if overused.

1035 Exchanges: Tax-Free Policy Swaps

IRC Section 1035 allows you to exchange one life insurance policy for another — or exchange a life insurance policy for an annuity — without triggering immediate taxation on any gain in the original contract. This is a powerful tool for policyowners who want to upgrade to a better policy, consolidate multiple policies, or reposition their insurance strategy without incurring a tax bill.

Permitted 1035 exchanges include:

• Life insurance policy → Life insurance policy
• Life insurance policy → Annuity (but not annuity → life insurance)
• Annuity → Annuity
• Life insurance policy → Long-term care insurance (under certain conditions)

Important MEC considerations for 1035 exchanges: If you exchange a MEC policy for a new policy, the new policy inherits MEC status. You cannot “cleanse” MEC status through a 1035 exchange. However, if you exchange a MEC life insurance policy for an annuity, the annuity is not subject to MEC rules (though annuity distribution rules under IRC Section 72 will apply).

Estate Tax Rules for Life Insurance

While life insurance death benefits are income-tax-free, they are not automatically estate-tax-free. Under IRC Section 2042, life insurance proceeds are included in the insured’s gross estate for federal estate tax purposes if:

• The proceeds are payable to the insured’s estate (or for the benefit of the estate), OR
• The insured possessed any “incidents of ownership” in the policy at the time of death — including the right to change beneficiaries, borrow against the policy, surrender or cancel it, or assign it.

For 2026, the federal estate tax exemption is approximately $13.99 million per individual (adjusted for inflation from the 2025 level of $13.61 million). Married couples can effectively shield up to roughly $27.98 million through portability. For estates below these thresholds, estate tax inclusion of life insurance proceeds is a non-issue. For high-net-worth individuals and families above the threshold, proper planning is essential.

Irrevocable Life Insurance Trust (ILIT)

The most common strategy for removing life insurance from the taxable estate is the Irrevocable Life Insurance Trust (ILIT). The ILIT owns the policy and is the beneficiary. Because the insured retains no incidents of ownership, the proceeds are excluded from the gross estate. Key rules:

• The trust must be truly irrevocable — the grantor cannot retain the power to revoke or amend.
• The insured cannot serve as trustee if they retain any powers that constitute incidents of ownership.
• If an existing policy is transferred to an ILIT, the three-year rule under IRC Section 2035 applies: if the insured dies within three years of the transfer, the proceeds are pulled back into the estate.
• Premium payments to the ILIT must be structured to qualify for the annual gift tax exclusion ($19,000 per recipient in 2026) using Crummey powers — giving trust beneficiaries a temporary right to withdraw contributions.

Gift Tax Considerations for Life Insurance

Transferring a life insurance policy or paying premiums on a policy owned by another person or entity can trigger gift tax implications:

• Gifting an existing policy: The value of the gift is generally the policy’s interpolated terminal reserve plus any unearned premium — not the death benefit and not the cash surrender value alone. The IRS provides guidelines for valuing life insurance policies for gift tax purposes.
• Paying premiums on a policy owned by another: Each premium payment is a gift to the policyowner. If the policy is owned by an ILIT, Crummey powers must be used to qualify premium contributions for the annual gift tax exclusion.
• Annual gift tax exclusion (2026): $19,000 per recipient (up from $18,000 in 2024). Gifts above this amount count against the lifetime gift and estate tax exemption.
• Gift splitting: Married couples can combine their annual exclusions to gift up to $38,000 per recipient in 2026 without using any lifetime exemption.

Taxation of Life Insurance Settlements (Viaticals and Life Settlements)

When a policyowner sells an existing life insurance policy to a third party through a life settlement or viatical settlement, the tax treatment depends on the seller’s circumstances:

• Viatical settlements (terminally or chronically ill insured): Proceeds are generally received income-tax-free under IRC Section 101(g), provided the buyer is a licensed viatical settlement provider.
• Life settlements (insured not terminally or chronically ill): The sale proceeds are taxed as follows:
  • Amount up to cost basis (total premiums paid) — tax-free return of basis.
  • Amount between cost basis and cash surrender value — taxed as ordinary income.
  • Amount above cash surrender value — taxed as capital gain.

Tax Reporting: What Forms to Expect

Understanding the tax forms you’ll receive helps you prepare for tax season and avoid surprises:

State-Level Life Insurance Taxation

While federal tax rules are uniform nationwide, state-level taxation of life insurance can vary. Key state-level considerations include:

• State estate taxes: Several states impose their own estate tax with exemption thresholds lower than the federal level. States with estate taxes in 2026 include Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, Washington, and the District of Columbia. Exemption thresholds range from $1 million to over $7 million depending on the state.
• State inheritance taxes: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania impose inheritance taxes on beneficiaries (rather than on the estate). Close family members (spouses, children) are often exempt or taxed at lower rates.
• Premium taxes: Most states impose a premium tax on life insurance policies (typically 1% to 3% of premiums), but this is paid by the insurance company and embedded in your premium — not a separate tax you pay directly.

Special Tax Rules for Different Policy Types

Term Life Insurance

Term life insurance is the simplest from a tax perspective. There is no cash value, so there are no tax-deferred growth, withdrawal, or loan considerations. Premiums are generally not tax-deductible for individuals. The death benefit is income-tax-free to beneficiaries. If you cancel a term policy, there is no taxable event — you simply stop paying premiums.

Whole Life Insurance

Whole life insurance builds guaranteed cash value and pays dividends (from mutual companies). Dividends are generally considered a return of premium and are not taxable until cumulative dividends received exceed total premiums paid — which typically takes decades. Dividends used to purchase paid-up additions increase both the death benefit and cash value on a tax-deferred basis.

Universal Life Insurance

Universal life policies offer flexible premiums, which creates both opportunity and risk from a tax perspective. The flexibility to pay large premiums in some years and skip premiums in others makes it easier to inadvertently trigger MEC status. Policyowners should carefully track cumulative premiums against the 7-pay limit, especially during the first seven years.

Indexed Universal Life (IUL)

IUL policies credit interest based on the performance of a market index (like the S&P 500) with a floor (typically 0%) and a cap. The tax treatment of IUL cash value growth is the same as other permanent policies — tax-deferred while inside the policy. However, IUL policies often use “option A” (level death benefit) or “option B” (increasing death benefit) designs, which affect the 7-pay limit calculation. Option B generally provides a higher 7-pay limit because the death benefit increases with cash value.

Variable Universal Life (VUL)

VUL policies allow the policyowner to invest cash value in sub-accounts similar to mutual funds. The tax treatment mirrors other permanent policies — growth is tax-deferred, and withdrawals/loans follow the same FIFO/LIFO rules depending on MEC status. However, VUL policies carry additional securities regulations and are sold with a prospectus.

Business-Owned Life Insurance Tax Rules

Life insurance used in business contexts — key person insurance, buy-sell agreements, executive bonus plans, and split-dollar arrangements — has its own set of tax rules:

• Key person insurance: Premiums paid by the business are not tax-deductible. Death benefits received by the business are generally income-tax-free (subject to the notice and consent requirements of IRC 101(j) for policies issued after August 17, 2006).
• Buy-sell agreements: When structured as a cross-purchase agreement (each owner buys policies on the other owners), premiums are not deductible and death benefits are tax-free. Entity redemption structures (the business owns the policies) follow the same rules but may have estate tax implications for surviving owners’ basis.
• Executive bonus plans (Section 162): The employer pays the premium and deducts it as compensation (if total compensation is reasonable). The premium amount is taxable as W-2 income to the executive, who owns the policy personally.
• Split-dollar arrangements: Complex tax rules govern the economic benefit of the death benefit protection provided to the employee. The employee is taxed each year on the economic value of the life insurance protection (measured by the IRS Table 2001 rates or the insurer’s published term rates).

2026 Tax Planning Strategies for Life Insurance

With the current tax environment in 2026, several strategies are particularly relevant for maximizing the tax advantages of life insurance:

1. Max-out non-MEC funding: Work with your agent to design a policy that allows you to pay the maximum premium possible without triggering MEC status. This maximizes tax-deferred cash value accumulation while preserving FIFO withdrawal treatment.
2. Use policy loans for retirement income: In retirement, take policy loans rather than withdrawals to access cash value tax-free. Manage the loan balance carefully to avoid policy lapse.
3. Consider a 1035 exchange for underperforming policies: If you own an older policy with high costs or poor performance, a 1035 exchange into a modern, more efficient policy can improve long-term results without triggering taxation on existing gains.
4. Leverage ILITs for estate tax planning: For estates approaching or exceeding the federal or state exemption thresholds, an ILIT can remove life insurance proceeds from the taxable estate while providing liquidity for estate taxes and other settlement costs.
5. Coordinate with retirement account RMDs: For those subject to required minimum distributions (RMDs) from IRAs and 401(k)s — which now begin at age 73 under SECURE 2.0 — life insurance cash value can serve as a tax-efficient supplement, allowing you to take smaller taxable RMDs.
6. Use life insurance for charitable giving: Naming a charity as beneficiary provides a significant charitable gift at death without reducing assets available during your lifetime. The death benefit is received income-tax-free by the charity, and the policy proceeds may generate an estate tax charitable deduction.

Video Guide: Life Insurance Tax Rules Explained

Watch this comprehensive video overview of how life insurance taxation works in 2026, including the 7-pay test, MEC rules, and strategies for maximizing tax advantages:

Frequently Asked Questions

Are life insurance premiums tax-deductible?

For individuals, life insurance premiums are not tax-deductible on your personal federal income tax return. The IRS treats personal life insurance premiums as a personal expense, similar to car insurance or homeowner’s insurance. There are limited exceptions: premiums paid by an employer as part of an executive bonus plan may be deductible to the business (as compensation), and premiums for policies donated to a charity may be deductible as a charitable contribution in certain circumstances.

Is the cash value growth in a life insurance policy taxable each year?

No. The internal buildup of cash value inside a permanent life insurance policy grows on a tax-deferred basis. You do not receive a 1099 each year and you do not report the growth on your tax return. Taxation only occurs when you withdraw gains from the policy (for non-MEC policies, only after you’ve exhausted your cost basis) or when the policy is surrendered. This tax-deferred treatment is one of the primary advantages of cash value life insurance.

What happens if my policy becomes a Modified Endowment Contract (MEC)?

If your permanent life insurance policy becomes a MEC, the tax treatment changes permanently and irreversibly. Withdrawals are taxed under LIFO (last-in, first-out) rules — meaning gains come out first and are taxed as ordinary income. Policy loans are treated as taxable distributions to the extent of gain in the contract. A 10% penalty applies to the taxable portion of any distribution taken before age 59½ (similar to early IRA withdrawals). The death benefit remains income-tax-free to beneficiaries, and cash value continues to grow tax-deferred while inside the policy. MEC status cannot be reversed, even through a 1035 exchange.

Can I avoid the 10% MEC penalty if I’m over 59½?

Yes. The 10% early distribution penalty on MEC withdrawals and loans applies only to distributions taken before the policyowner reaches age 59½. Once you reach age 59½, the penalty no longer applies — but the LIFO tax treatment remains. Distributions from a MEC after age 59½ are still taxed as ordinary income to the extent of gain in the contract, but without the additional 10% penalty. There are also limited exceptions to the 10% penalty (similar to IRA exceptions) for disability and certain annuity-like payout structures.

Are life insurance policy loans really tax-free?

For non-MEC policies, yes — policy loans are treated as true loans, not as taxable distributions. The IRS does not consider borrowed money to be income, and the insurance company’s loan against your cash value follows this principle. However, this tax-free treatment has limits: if the policy lapses or is surrendered with an outstanding loan balance, the loan amount that exceeds your cost basis becomes taxable income in that year. For MEC policies, loans are treated as distributions and are taxable to the extent of gain in the contract — a dramatically different treatment.

How does a 1035 exchange work for tax purposes?

A 1035 exchange allows you to swap one life insurance policy for another (or exchange a life insurance policy for an annuity) without triggering taxation on any gain in the original contract. The cost basis from the old policy carries over to the new policy. The exchange must be direct — you cannot receive the cash surrender value and then purchase a new policy; the funds must move directly from one carrier to another. A 1035 exchange of a MEC policy into a new life insurance policy does not cure the MEC status — the new policy inherits MEC classification. However, exchanging a MEC life insurance policy for an annuity removes the MEC classification (though annuity distribution rules then apply).

Do beneficiaries pay tax on life insurance death benefits?

No. Under IRC Section 101(a), life insurance death benefits paid to a named beneficiary are excluded from gross income and received 100% income-tax-free. This applies regardless of the policy type (term, whole, universal, variable), the policy size, or whether the policy is a MEC. The only exception is if the death benefit is paid in installments with interest — the interest portion is taxable, but the principal remains tax-free. For estate tax purposes, however, the death benefit may be included in the insured’s gross estate if the insured owned the policy or retained incidents of ownership at death.

Related Resources

Explore these related guides on LifeQuotesWeb for a deeper understanding of life insurance and its tax implications:

• Whole Life Insurance: Complete 2026 Guide — Learn how whole life insurance builds guaranteed cash value with tax-deferred growth.
• Universal Life Insurance: Flexible Coverage Explained — Understand how universal life’s flexible premiums interact with the 7-pay test and MEC rules.
• Cash Value Life Insurance: How It Works and Tax Benefits — Deep dive into how cash value accumulates and the tax advantages of permanent coverage.
• Term Life Insurance Rates 2026: Compare Quotes — Compare affordable term life rates and understand why term policies have minimal tax complexity.
• Life Insurance Tax Rules: IRS Guidelines and Strategies — Additional tax planning strategies for life insurance policyowners.

External Authority Resources

For official guidance on life insurance taxation, consult these authoritative sources:

• IRS Publication 525: Taxable and Nontaxable Income — Official IRS guidance on the tax treatment of life insurance proceeds, including the transfer-for-value rule and MEC distributions.
• U.S. Code: IRC Section 7702A — Modified Endowment Contracts — The full statutory text defining MECs and the 7-pay test.
• NAIC Consumer Resources — The National Association of Insurance Commissioners provides consumer education on life insurance products and regulations.
• AM Best Ratings — Check the financial strength ratings of life insurance carriers before purchasing a policy.

Protect Your Family With Tax-Advantaged Coverage

Life insurance remains one of the most tax-efficient financial tools available to American families in 2026. The combination of income-tax-free death benefits, tax-deferred cash value growth, and tax-advantaged access to cash value (through FIFO withdrawals and policy loans) creates a unique value proposition that no other financial product can match. But these benefits require careful planning — particularly around the 7-pay test and MEC rules.

Whether you’re purchasing your first term policy to protect a young family, building cash value in a whole life policy for supplemental retirement income, or structuring an ILIT for estate tax planning, understanding the tax rules is essential to maximizing the value of your coverage. Work with a qualified insurance professional and a tax advisor to design a strategy that fits your specific financial situation and goals.

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