#Irc 162 full#
#Irc 162 plus#
#Irc 162 free#

#Irc 162 full#

The client can get back the full $100,000 premium outlay in cash by a simple surrender request after the contract has been in force for 10 years. The client has locked-in a tax-free death benefit for his family of at least $173,779 if no LTC claims are ever made during lifetime.

SUMMARY OF 10 PAY вЂњLINKED-BENEFITвЂќ GUARANTEED PLAN BENEFITSДЄs you can see from the chart above, a very substantial Life-LTC вЂњLinked BenefitвЂќ program has been funded by business cash flow. As annual premiums are paid, a graduated vested Return of Premium (ROP) benefit accrues for a complete surrender of the contract.HI component of FICA is levied against unlimited earned income) The Section 162 bonus is considered to be вЂњearned incomeвЂќ for FICA withholding purposes (OASDI limit for FICA withholding is $118,500 of earned income in 2016.

#Irc 162 plus#

$15,000 x 33% = $5,000 for income tax plus $10,000 is left after-tax to pay the annual premium of $10,000.In a 33% personal tax bracket, the firm could pay an вЂњextra bonusвЂќ so that the shareholder-employee has a so-called вЂњzero net after-tax outlayвЂќ from a cash flow point of view.The business will deduct the annual bonuses as a Section 162 compensation expense and the business owner will report W-2 earned income each year equal to the total bonus amount.The company will pay annual premiums of $10,000 each year for 10 years via a Section 162 Executive Bonus to the shareholder-employee.An application is taken with a short form medical questionnaire.Lifetime benefits are guaranteed with only 10 premium payments. Purchase a 10-Pay вЂњLinked-BenefitвЂќ Flex Pay life insurance product owned personally by the business owner.The business is currently profitable and is expected to grow over the next few years as the general economy recovers.He also would like to be able to withdraw funds from this plan while he is still working for other personal emergencies that may arise and would like his family to get some benefit at his death if no LTC claims are ever made during his lifetime.He asks for a recommendation to design a plan that would provide LTC insurance benefits if he has LTC claims as he gets older.The business owner has a combined personal tax bracket of 33% for income tax purposes.This shareholder-employee would like to use current business cash flow to fund personal protection for potential long term care (LTC) expenses.A shareholder-employee, a 50 year old male, is the majority owner of a successful S Corp, and is in good health.

The annual premiums for this executive benefit is generally deductible to the employer as a compensation expense under IRC Section 162 and is currently taxable to the shareholder-employee or non-owner key employee as W-2 earned income.

#Irc 162 free#

Charges against cash value for the cost of the LTC rider are simply a tax free reduction to the cost basis of the policy.

Any LTC benefit claim payments are received tax free and will simply reduce the death benefit down to a minimum residual amount. The premium payment schedule for a guaranteed paid-up contract is typically 5 to 10 years. Maybe the most practical вЂњlinked benefitвЂќ type of life insurance product is a вЂњflex payвЂќ type of product that provides basic life insurance protection along with valuable long term care (LTC) rider benefits. ItвЂ™s called a Flex Pay вЂњLinked-BenefitвЂќ Executive Bonus Plan. The shareholder-employee could be the owner of shares in a C Corp, S Corp, or LLC.ДЄ new type of Section 162 Bonus Plan is available for business owners and professionals. The employer may even pay an вЂњextra bonusвЂќ so that the shareholder-employee or non-owner key employee has enough cash to pay both the tax on the gross bonus plus the full policy premium. Future FIFO withdrawals up to cost basis and policy loans can be made tax free. The bonus is used to pay an annual premium for a personally owned insurance policy. The employer simply makes a tax deductible bonus to the shareholder-employee or non-owner key employee who then reports the full bonus as W-2 earned income. IRC Section 162 Executive Bonus Plans funded with cash accumulation life insurance policies have provided a time-tested non-qualified benefit for many years.