Tax Free Benefits

Benefits of a

Modified Endowment

No Income Tax To Beneficiaries

Modified Endowment Contracts (MECs) offer enhanced financial protection by providing proceeds greater than the initial premium paid. These proceeds are distributed tax-free to your beneficiaries, bypass probate court and legal fees.

No Federal Estate Tax

The proceeds from MECs pass directly to beneficiaries free from federal estate tax. This means that if your estate’s value falls below $13.61 million for individuals or $27.22 million for married couples in 2024, your beneficiaries will not owe federal estate tax on the MEC proceeds.

No Risk Growth

Enjoy the growth of your cash value without market risk. Your money grows at a fixed interest rate or is linked to an Indexed Fund, ensuring the safety of your principal and earned income. Rest assured, there’s never a negative return; market gains are locked in, safeguarding your earnings against market downturns.

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Tax-Deferred Growth

Unlock the power of tax-deferred growth where your cash value grows without being taxed, allowing your principal, and earned income to compound for maximum growth. Taxes are only paid on interest earnings when withdrawn, giving you control over when and how you manage your tax liability.

Full Access to Your Cash Value

As the contract owner, you have full access to the cash value, providing flexibility and peace of mind as you build your financial future.

Tax Free Withdrawals

Understanding the taxation of withdrawals from a MEC is necessary. With a last-in-first-out (LIFO) basis, growth exceeding the principal is taxed first, followed by tax-free principal withdrawals. Early withdrawals before age 59 1/2 may incur a 10% IRS tax penalty.

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For complete details on tax-free withdrawal options, please contact our office.

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