Surrendering a Life Insurance Policy pre 59.5
I have a client who has had a policy with me for several years now that has just surrendered her Life policy and she is 57 years old and her husband is 67. The reason why she surrendered it was because she need the money along with money from the sale of their current home to buy a new home. Their daughter is 19 years old and in College that they pay for. Will any of these items exclude her from having to pay the IRS 10% penalty?
Thanks
Permalink Submitted by Alan - IRA critic on Tue, 2017-03-14 23:31
There is no 10% penalty on a surrendered life policy. The taxable amount is the amount received that exceeds the premiums paid for the policy. The 1099R should be coded 7 regardless of age.