Many moons ago, my parents took out a loan against a whole life insurance policy on me. Now the policy is underwater and the insurance comapny wants to terminate it and I'm taking a tax hit. Can I avoid this? This is kinda complicated and weird I don't really know if there is anything I can do. Details here are sketchy I guess since I don't really know much and the statements I get are not very detailed.
My grandfather bought a whole life insurance policy on me in 1980 (when I was 5). At some point in my life, my mom took out a loan on the policy and never repaid anything. When my mom died (4 years ago), I started getting interest bills for this loan that I never knew about on a policy I didn't even know existed. I've irresponsibly ignored them for 4 years. I assume she was ignoring them before that. She never mentioned anything to me about it.
At this point, the loan + interest is now more than the policy, so the company wants to terminate it. When they terminate it, the value of the loan will turn in to taxable income for me.
Is there anything I can do to avoid this? I don't know if what my mom did was illegal or not, but I don't want to cause any problems for my family. But if there is some way I can get out of the tax burden caused by this policy I'd like to, since I didn't get any money out of it.
If my mom were alive and asked me for money, I would have given it to her. So if I need to just suck it up and pay, I of course will. Who knows how to deal with this stuff? Instead of the internet (you all rock by the way, no offense meant), should I be asking these questions to the insurance company? A tax person?
My grandfather bought a whole life insurance policy on me in 1980 (when I was 5). At some point in my life, my mom took out a loan on the policy and never repaid anything. When my mom died (4 years ago), I started getting interest bills for this loan that I never knew about on a policy I didn't even know existed. I've irresponsibly ignored them for 4 years. I assume she was ignoring them before that. She never mentioned anything to me about it.
At this point, the loan + interest is now more than the policy, so the company wants to terminate it. When they terminate it, the value of the loan will turn in to taxable income for me.
Is there anything I can do to avoid this? I don't know if what my mom did was illegal or not, but I don't want to cause any problems for my family. But if there is some way I can get out of the tax burden caused by this policy I'd like to, since I didn't get any money out of it.
If my mom were alive and asked me for money, I would have given it to her. So if I need to just suck it up and pay, I of course will. Who knows how to deal with this stuff? Instead of the internet (you all rock by the way, no offense meant), should I be asking these questions to the insurance company? A tax person?