February 12, 2021 - Michael H. Karu, CPA/CFF, Senior Member, Levine, Jacobs & Company, LLC., was quoted on NJMoneyHelp.com where he answered the question: “My wife cashed in an insurance policy that was in her name. She is 74. Do we have to claim it as income?”
“When a life insurance policy is cashed in, it triggers a potentially taxable event.” Karu stated. He explained how calculations are typically done by the insurance company and only a portion of the proceeds are usually taxable.
Karu offered advice on the steps to take before cashing in a policy. “Our advice is always to check with the insurance company before cashing in a policy and ask for the amount that would be taxable upon termination.” He further elaborates, “Alternatively, if you borrow against a policy, the loan is not currently taxable. But there could be some future tax considerations if the policy is terminated before death.”
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Michael H. Karu, CPA/CFF, is a senior member of Levine, Jacobs & Company, LLC, a Livingston-based accounting and consulting firm. He is qualified by the Superior Court of New Jersey, Family Part, as an expert witness and as an authority on business valuations, specifically for closely held or family-owned businesses. Additionally, he is a Certified Divorce Mediator and is Certified in Financial Forensics.
Karu received his B.S. degree in Business Administration from The Ohio State University and holds professional memberships in the American Institute of Certified Public Accountants, the AICPA Tax Division and the AICPA Business Valuation, Forensics and Litigation Services Section, as well as the NJ State Society of CPAs. Karu is a published author of numerous articles seen in trade and consumer publications and has been a guest on radio and television shows.
Levine, Jacobs & Company, L.L.C. maintains memberships in the American Institute of Certified Public Accountants and the New Jersey Society of Certified Public Accountants. The firm prides itself on its teamwork abilities where “every account receives the talent and expertise of the whole firm.”
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