Endowment Policy - anyone know the tax implications when a policy matures?
Feb 10th 2008, 10:47 pm
#1
Just Joined
Thread Starter
Joined: Oct 2007
Location: Malden, MA
Posts: 16
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?
Feb 11th 2008, 2:03 pm
#2
Who?
Joined: Oct 2004
Location: Stepford
Posts: 3,098
Re: 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?
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.
Feb 11th 2008, 6:46 pm
#3
Ping-ponger
Joined: Jul 2002
Location: Dreich Alba
Posts: 12,005
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 ...
... 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 ...
Feb 11th 2008, 6:50 pm
#4
Who?
Joined: Oct 2004
Location: Stepford
Posts: 3,098
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 ...
... 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 ...
Feb 11th 2008, 7:36 pm
#5
Lost in BE Cyberspace
Joined: Jan 2006
Location: San Francisco
Posts: 12,865
Re: Endowment Policy - anyone know the tax implications when a policy matures?
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?)
Feb 11th 2008, 10:19 pm
#6
Joined: Apr 2005
Location: Milwaukie, Oregon
Posts: 9,965
Re: Endowment Policy - anyone know the tax implications when a policy matures?
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.
Feb 12th 2008, 6:37 pm
#7
Just Joined
Thread Starter
Joined: Oct 2007
Location: Malden, MA
Posts: 16
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!
