Enhanced Whole Life

[momofrose]

What is the name of your state (only U.S. law)? NJ

Surrendering an enhanced whole life policy - have paid $31.00 for 10 years. the net cash worth is only $1989.09 - I have paid much more into it, yet I am being advised by the insurance co (Mass Mututal) that there will be tax penalities - how can that be? This is not a pre-tax contribution.
Can anyone shed some light?

 

[momofrose]

bump for replies..thanks

 

[LdiJ]

What is the name of your state (only U.S. law)? NJ

Surrendering an enhanced whole life policy - have paid $31.00 for 10 years. the net cash worth is only $1989.09 - I have paid much more into it, yet I am being advised by the insurance co (Mass Mututal) that there will be tax penalities - how can that be? This is not a pre-tax contribution.
Can anyone shed some light?

A portion of your payments went to cash value, and you earned interest on that portion. Therefore you will be issued a 1099 showing how much of it is taxable, and how much is not. Considering the size of your payments and the time frame its likely that only a few hundred dollars will end up being taxable, so you are not looking at a lot of tax.