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How Are Cancer Loans Taxed?

It seems patently unfair that those in the midst of a cancer journey must also deal with the same daily details of life as the rest of the world … it seems as though there should be some kind of free pass that allows people in the midst of an advanced stage illness to skip over concerns such as filing taxes, or shopping for groceries, or renewing their automobile registration.

Unfortunately, these waivers don’t exist, and though patients may be able to get help with running to the market or waiting in line at the DMV, it’s unlikely that the IRS is going to be similarly helpful. That means that when cancer patients are looking at available solutions to the financial stress caused by their condition, they need to think beyond what will provide them with the most money and the least hassle – they also have to think about the tax ramifications of their choice.

How are cancer loans taxed?

If you or someone you love is considering taking out a cancer loan to help pay medical bills, or even to have the money available to take a family trip or for any other needs, it is important that you fully investigate the tax ramifications of taking out such a loan. Many policy holders wonder whether life insurance loan proceeds are taxable, and the answer can be complicated, as many life insurance policies have evolved into products that closely resemble investments.

What does the IRS require?

There are several factors that can make cashing in life insurance for a cancer loan appealing, but it is important that you make certain that your life insurance contract meets all of the IRS requirements for what constitutes a life insurance policy. These include the type of policy, when it was issued, what the death benefit is, and how much was paid in premiums.  The IRS simply wants to ensure that the policy is in fact life insurance rather than an investment and that the premiums on the policy were paid with after-tax dollars.

Generally speaking, if you are struggling with an advanced stage illness and choose to take out a life insurance loan, you probably won’t have to pay taxes on the amount of the loan unless it is what is known as an MEC, or modified endowment contract. An MEC is a cash-value life insurance policy that provides its owner with tax-free growth within the policy. The IRS has set limits for how much money can be put into these policies, as well as on the tax benefits of cash value withdrawals, however both your life insurance company and any company that is providing a life insurance loan will be familiar with these limitations, and will be able to advise you on protecting yourself from any negative tax ramifications by ensuring that the amount that is loaned does not exceed the allowable amount.

One way or another, the taxes that the government assesses when value is transferred out of a life insurance policy generally do not apply and are not taxed when the value is being transferred to the insured. If you are investigating taking out a life insurance loan and would like to know how the tax rules apply to your particular situation, the professionals at Fifth Season Financial are happy to help. Contact us today and let us review your situation.

How Cancer Patients Are Paying For Treatments:

Between medical bills and limited financial assistance programs, cancer patients are often left to figure out how to pay for daily living expenses, replace their incomes if they can no longer work, and pay for ongoing cancer treatments.  In one study, cancer patients used the following financial resources to cover treatments:

  • 43 percent had used savings
  • 21 percent had taken out loans to pay for medication
  • 17 percent had delayed their treatment due to costs
  • 10 percent stopped treatment entirely

Cancer Loans:  No out-of-pocket expenses, No personal liability

Taking a loan from your life insurance policy to cover cancer costs can help alleviate the financial stress in your life so you can focus on important things like your care, spending time with family and friends, and living life to the fullest.  With a cancer loan from your life insurance policy, it provides the following benefits to you:

  • No Out-of-Pocket Expenses  -You will never be asked to pay any out-of-pocket expenses. We take over your life insurance policy payments, which will reduce your expenses.
  • No Monthly Payments -You will never make a monthly payment. Ever. We do not require any payments from you for the funds you access through our program.
  • Get Funds Fast — within 48 hours  -Once  you get qualified and submit an application, we can typically advance funds to you within 48 hours. Our process is fast.
  • No Restrictions On The Money – YOU choose how to spend the money. Pay bills, take a vacation or start a business.  It’s your choice!

or call us toll-free at (866) 459-1271

Disclaimer:  Always be sure to consult with your accountant, lawyer, or other financial professional about your specific insurance policy and tax details. We do not offer tax or legal advice.  The above is for general information as each situation varies, as do tax laws and requirements.

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Fifth Season Financial, L.P. (“Fifth Season”) is a licensed consumer lender in certain states. Loans being made or arranged by Fifth Season to California residents are made or arranged pursuant to a California Financing Law license, California lender license #603 E043. Loans being made or arranged by Fifth Season to Texas residents are made or arranged pursuant to a Texas Regulated Lender License, Texas lender license #14000508545-151373. This site is directed at, and made available to, persons in the continental U.S., Alaska and Hawaii only. The Funds for Living Program is not available to residents of all states. Fifth Season’s principal place of business is 201 Broad Street, Suite 500, Stamford, CT 06901, Phone 855.45.FUNDS.

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