Author Topic: Tax implications of liquidating and canelling a universal life policy?  (Read 1258 times)


  • Stubble
  • **
  • Posts: 133
 I made the huge mistake of buying a universal life policy almost 10 years ago.  The surrender period will be up in a couple of months and I will end the policy.  The cash value (once I lose the bogus surrender charge) is $23,000.

I'm thinking of just moving that money into a taxable vanguard brokerage account.

Does anyone know if there will be any tax considerations with doing this?


  • Senior Mustachian
  • ********
  • Posts: 10746
You will likely owe tax (at ordinary income tax rates) on any amount above what you contributed from outside the policy.

E.g., if you wrote checks for $13K in premiums, you will owe tax on $23K - $13K = $10K in interest.

The notes above assume any interest credited to your account over the past 10 years has not been taxed.