Are you planning to sit for the Series 6 exam soon? Then you need to know the tax treatment of variable life insurance policies.
For example, what happens during the life of the variable insurance? How are earnings, interest, capital gains and dividends treated? Are they taxed every year or only when any payout occurs? Suppose the insured dies, are the life insurance proceeds included in the estate of the decedent? Are they taxed as ordinary income to the beneficiaries?
What happens if the insured makes a full or partial surrender of the policy for its cash value?
And how about 1035 exchanges, where the owner/insured exchanges one life policy for another? Will IRS impose tax at the time of the exchange?
All these questions are covered by the Series 6 exam.
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