Private placement life insurance arrangements may enable wealthy taxpayers to borrow against policies at favorable rates and pass on wealth to their heirs tax-free. In late Dec. 2024, outgoing Senate Finance Committee Chair Ron Wyden (D-OR) proposed legislation that would end such preferential tax treatment. According to Wyden, private placement policies are nothing more than tax shelters. Under the proposed bill, contract holders would be treated as having received or accrued any net income, regardless of whether it’s distributed. Any excess distribution would be considered taxable income. However, the future of Wyden’s proposal is uncertain now that Republicans control the Senate.
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