What are the tax consequences of surrendering Bank Owned Life Insurance (BOLI)?
Any gain above the premium that the bank paid would be taxed at the normal rate. In addition, most BOLI policies are classified as Modified Endowment Contracts. These types of policies allow for the most efficient cash surrender value growth possible, but any gain is subject to an additional 10% penalty tax if the policies’ cash values are accessed. However, even with this penalty tax, the net BOLI returns may compare favorably to other financing alternatives over the same time period. Q: Bank Owned Life Insurance (BOLI) is a long-term asset. How can I manage credit risk? A: The bank should do a thorough review of the credit worthiness of any potential carrier as part of its due diligence. The Executive Benefits Network can provide you with updated credit information over the life of your BOLI coverage. Q: What happens if the tax treatment of Bank Owned Life Insurance (BOLI) changes? A: BOLI’s current tax benefits have been unsuccessfully challenged over the years. There are strong ban
Related Questions
- Is it true that there are sometimes bank morgage tax consequences to settling a debt for less than the original balance?
- Beyond banking regulations, are there limits on how much Bank Owned Life Insurance (BOLI) a bank can purchase?
- What are the tax consequences of surrendering Bank Owned Life Insurance (BOLI)?
