Term
| Loans from a Life Insurance Policy |
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Definition
| Not considered income and are NOT taxable |
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Term
| Dividends received on participating policy |
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Definition
| not taxable since they are considered a return of overcharge of premium |
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Term
MECs
Modified Endowment Contracts. |
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Definition
A policy that has too much premiums paid into a Life Insurance policy in the first 7 yrs fails to meet standards established in 1988.
Things that change:
1. FIFO changes to LIFO
2. When a policy is labeled as MEC, a policy loan becomes taxable if the amount of the loan comes from the growth
3. Any $$ that comes out before owner is 59.5 yrs old is assessed a 10% penalty in addition to income tax |
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Term
| Loan or partial withdrawal from annuity |
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Definition
| Amounts are treated as distributions of interest first, and as recovery of cost 2nd. Taxable amounts may also be subject to the IRS 10% penalty tax. |
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Term
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Definition
| Employee Retirement Income Security Act - when annuities are used to fund group or ind qualified retirement plans. Most common are 401k plans where employer uses Variable Annuity |
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Term
| TSAa (Tax Sheltered Annuities) |
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Definition
| Tax-sheltered Annuity also known as 403b. Certain employees like teachers, non-profits. Contributes pre-tax dollars via payroll deduction |
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Term
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Definition
| for public employees like state workers, police. |
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Term
| Simplified Employee Pensions (SEP - 408k_ |
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Definition
| llow sole proprietors, indep contractors to put a percentage of earnings for the owner and any direct employees into a deferred retirement acct |
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Term
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Definition
| An employee can take an employer-sponsored retirement plan and transfer proceeds to own IRA. vesting means they met the requirements to take the company's contributions as well. |
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Term
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Definition
| Employee works 3 yrs and keeps them |
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Term
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Definition
| after 2 yrs, employee vests 20%, another 20% each yr after and at yr 6 is completely vested |
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