Which of these statements describe a modified endowment contract (mec)
Which statement describes a modified endowment contract?
A modified endowment contract (MEC) is a designation given to cash value life insurance contracts that have exceeded legal tax limits. When the IRS relabels your life insurance policy as an MEC, it removes the tax benefits of withdrawals you can make from the policy.
What are the characteristics of a modified endowment contract?
Which of the following would always be considered a Modified Endowment Contract? Single Premium Whole Life would always be a MEC as it would always fail the 7-Pay Test.
Which of the following would always be considered a modified endowment contract?
Any insurance plan that meets the Affordable Care Act requirement for having health coverage.
What is modified endowment contract-MEC?
What is 'Modified Endowment Contract - MEC'. A modified endowment contract (MEC) is a tax qualification of a life insurance policy whose cumulative premiums exceed federal tax law limits. The taxation structure and IRS policy classification changes after becoming a modified endowment policy. Next Up.
How are withdrawals from a modified endowment contract taxed?
The taxation of withdrawals under the MEC is similar to that of non-qualified annuity withdrawals. A modified endowment contract (MEC) happens when the IRS no longer recognizes a policy as a life insurance contract, because the total collected premiums exceed federal tax law limits.
What is a MEC contract?
A MEC contract is a life insurance policy whose cumulative premiums have exceeded U.S. federal tax law limits. In other words, the IRS no longer considers the MEC a life insurance contract. Instead, it is classified as a specialized vehicle for the purpose of tax avoidance.
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