I have a question on whole life policies and tax implications on surrender. A relative has a Prudential whole life policy - they have paid ~$88/year for decades, in premiums. No outstanding loans. Simple math says the premiums paid so far exceed the face value and cash value of the policy, but when I asked Prudential for the cash basis, they told me it's $88. Is it possible that dividends they've paid have been effectively partial return of premium so that her cost basis is literally that low? It makes no sense to me. Effectively they are teling me her taxable amount is nearly the entire cash value.
Jen Kuntz
I have a question on whole life policies and tax implications on surrender. A relative has a Prudential whole life policy - they have paid ~$88/year for decades, in premiums. No outstanding loans. Simple math says the premiums paid so far exceed the face value and cash value of the policy, but when I asked Prudential for the cash basis, they told me it's $88. Is it possible that dividends they've paid have been effectively partial return of premium so that her cost basis is literally that low? It makes no sense to me. Effectively they are teling me her taxable amount is nearly the entire cash value.
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