Surrendering whole life policies

Forum|Forum|6 years ago
February 13, 2020
1 reply
16 views

I have an individual whole life policy for myself and I also opened independent whole life policies for each of my 2 boys. I am considering surrendering all three whole life policies, but am concerned with the possible tax implications for doing this. My policy has a "Net Cash Value" of $6996. There is another section showing the dividends for the policy. The "Maximum Dividend Available" is $415 with another line that is labeled "Paid Up Additions Face Amount" of $2019. I would like to know if I will be responsible for taxes on the "Net Cash Value" amount, the "Maximum Dividend Available", or the "Paid Up Additions Face Amount". The boys policies are similar, but much lower in value. Any help would be greatly appreciated.

DavidD66

Level 15

The amount you will be taxed on upon the surrender of a whole life insurance policy is the difference between the cash-surrender value and your cost basis. In order to determine how much tax you will pay when you opt to take your cash-surrender value, you must first determine the total sum of premiums that you have paid into the policy over its lifetime, less any prior withdrawals. In the event that your basis is larger than the cash-surrender value of the policy, you will still receive the cash-out amount but will not be required to pay any tax on these funds.

Your insurance company can easily provide this information to you. I suggest you contact them and ask them for the necessary information to determine what your taxable amount would be upon surrender.

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