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A modified endowment contract (MEC) is a cash value life insurance contract in the United States where the premiums paid have exceeded the amount allowed to keep the full tax treatment of a cash value life insurance policy. In a modified endowment contract, distributions of cash value are taken from taxable gains first as compared to ...
A modified endowment contract (MEC) is a former life insurance policy that has lost specific advantages due to accumulating surplus cash. For instance, permanent life insurance policies, such as ...
Contract to a new life insurance policy via the 1035 exchange privilege will render the newly issued contract as Modified Endowment Contract as well. This change to the law put an end to the widespread sale of traditional endowment policies in the United States such as Endowment at Age 65, Ten-Pay Endowment, Twenty-Pay Endowment, etc.
In flexible-premium policies, large deposits of premiums could cause the contract to be considered a modified endowment contract by the Internal Revenue Service (IRS), which negates many of the tax advantages associated with life insurance. The insurance company, in most cases, will inform the policy owner of this danger before deciding their ...
Universal life insurance (often shortened to UL) is a type of cash value [1] life insurance, sold primarily in the United States.Under the terms of the policy, the excess of premium payments above the current cost of insurance is credited to the cash value of the policy, which is credited each month with interest.
The standard set was twofold: to define a maximum amount of cash value per death benefit and to define a maximum premium for a given death benefit. If the maximum premium is exceeded the policy no longer qualifies for all of the benefits of a life insurance contract and is instead known as a modified endowment contract or a MEC.
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Endowment funds – permanent are used to account for the principal amount of gifts or grants the organization is required, by agreement with the donor, to maintain intact in perpetuity or until a specific future date/event or has been used for the purpose for which it was given.