Life insurance is one of the few financial tools that can be used tax-free—if structured correctly. Here’s what you need to know in 2025.
Tax-Free Death Benefit: In most cases, life insurance death benefits are not taxable. But there are exceptions if you transfer ownership or structure it incorrectly.
Cash Value Tax Rules:
- Growth inside a policy is tax-deferred
- Withdrawals up to basis are tax-free
- Loans are tax-free if the policy stays in force
Avoiding Tax Traps:
- Don’t MEC your policy (Modified Endowment Contract)
- Work with a licensed advisor
- Get a free policy review to make sure your life insurance is 100% tax-efficient.
