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Endowment Policy - anyone know the tax implications when a policy matures?

Endowment Policy - anyone know the tax implications when a policy matures?

Old Feb 10th 2008, 10:47 pm
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Default Endowment Policy - anyone know the tax implications when a policy matures?

I was one of the millions of poor saps who swallowed the endowment mortage story back in the 80s. However, I sold the house when I set up home here in the US and it seemed to make sense to keep the endowment policy going (relatively small premium per month). It will mature in a few years and I was wondering what the tax implications might be in the US when the policy matures. Anyone have any experience/thoughts?
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Old Feb 11th 2008, 2:03 pm
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Default Re: Endowment Policy - anyone know the tax implications when a policy matures?

Originally Posted by dvalentine View Post
I was one of the millions of poor saps who swallowed the endowment mortage story back in the 80s. However, I sold the house when I set up home here in the US and it seemed to make sense to keep the endowment policy going (relatively small premium per month). It will mature in a few years and I was wondering what the tax implications might be in the US when the policy matures. Anyone have any experience/thoughts?
I was just wondering exactly the same thing.
Like you, we sold the house but kept up the payments and we have several endowments. Only one has made a small profit...the original one. The others are in the red but of course that doesn't matter to us as they don't have to pay off a loan any more.

I am planning to ask our accountant later this week so if no-one has come up with an answer here, I'll post what she says.
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Old Feb 11th 2008, 6:46 pm
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Default Re: Endowment Policy - anyone know the tax implications when a policy matures?

This has come up before, last time was maybe just a month or so ago ...

... but there was no definitive answer. Similar questions have been asked about other "tax free" payments, i.e., tax free in the country of origin. So, for example, UK pension lump sum (tax free in UK, but what if you are living in the UK?), Roth IRA payments (tax free in the US, but what if you are living in the UK?)

... my recall of the last time this came up was that most opinions were that the US probably would tax you on it if they knew about it ...


... if they knew about it ...


... nod's as good as a wink to a blind horse and all that ...
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Old Feb 11th 2008, 6:50 pm
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Default Re: Endowment Policy - anyone know the tax implications when a policy matures?

Originally Posted by dunroving View Post
This has come up before, last time was maybe just a month or so ago ...

... but there was no definitive answer. Similar questions have been asked about other "tax free" payments, i.e., tax free in the country of origin. So, for example, UK pension lump sum (tax free in UK, but what if you are living in the UK?), Roth IRA payments (tax free in the US, but what if you are living in the UK?)

... my recall of the last time this came up was that most opinions were that the US probably would tax you on it if they knew about it ...


... if they knew about it ...


... nod's as good as a wink to a blind horse and all that ...
I can be a blind horse
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Old Feb 11th 2008, 7:36 pm
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Default Re: Endowment Policy - anyone know the tax implications when a policy matures?

Originally Posted by dunroving View Post
Similar questions have been asked about other "tax free" payments, i.e., tax free in the country of origin. So, for example, UK pension lump sum (tax free in UK, but what if you are living in the UK?), Roth IRA payments (tax free in the US, but what if you are living in the UK?)
At least for the Roth IRA there is a definitive answer - it's covered by the UK/US tax treaty and distributions from it are UK tax free if you're living in the UK.
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Old Feb 11th 2008, 10:19 pm
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Default Re: Endowment Policy - anyone know the tax implications when a policy matures?

Originally Posted by dunroving View Post
... my recall of the last time this came up was that most opinions were that the US probably would tax you on it if they knew about it ...


... if they knew about it ...


... nod's as good as a wink to a blind horse and all that ...
The best advice we got was similar to yours. If they knew they would tax you on the profit part. ie payout less premiums paid.
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Old Feb 12th 2008, 6:37 pm
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Default Re: Endowment Policy - anyone know the tax implications when a policy matures?

Thanks All, I did find some references in other threads but the suggestions for endowments didn't seem very definite - now I know why - no one really knows yet. I have a couple of years before maturity so I'll keep an eye out for info from anyone who hits it before I do. My guess is that the payment over and above the total premiums paid will need to be reported to the IRS as income - not quite the windfall I was hoping for but better than a kick in the teeth. It is funny to think what would have happened if I still had the UK mortgage. Would it still have classed as income even if it was used to pay off the mortgage? That would have been a pisser to have to pay taxes on money that I wouldn't actually get!
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