What is the seven-pay test?
This means the seven-pay test is a test that is perpetually applied to permanent life insurance contracts. As such, the seven pay test is something all permanent policyholders should be aware of because once a policy becomes a MEC, prompt action must be taken to reverse this status if you want to avoid negative tax treatment in all future years.
What is the seven pay test for life insurance?
The seven pay test is a limit that the Internal Revenue Code places on the amount of premiums that can be put into a life insurance contract. All cash value policies are subject to this test.
What is the Tamra 7-Pay Test?
The policy must fail to meet the Technical and Miscellaneous Revenue Act of 1988 (TAMRA) 7-pay test. The seven-pay test determines whether the total amount of premiums paid into a life insurance policy, within the first seven years, is more than what was required to have the policy considered paid up in seven years.