What happens when a Death Claim is processed on a TSA, which has active loan(s)?

The beneficiary has two options to choose from when an active loan exists on a contract:

Option 1:
 The beneficiary can pay off the loan and then get the death benefit. If the beneficiary is a spouse, 20% will be withheld from the benefit.

Option 2:
 Forfeit the loan and then the beneficiary receives the benefit. If the beneficiary is a non-spouse, the loan forfeiture is taxable to the owner's estate and then only the proceeds are taxable to the beneficiary. If the beneficiary is a spouse, the loan forfeiture and the benefit are both taxable to the beneficiary.



Nothing contained herein is intended to be, nor should it be construed as tax or legal advice. If you have a tax question or legal question, please consult your tax professional or attorney.


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