I’m not just saying that because I live in Florida and it happens to be one of my favorite states. Florida really can be one of the best states to own an annuity! It is one of the few states where annuities can help provide protection from lawsuits and creditors. Florida has certain laws that help protect your annuities and life insurance assets. Because of this, many people in Florida place their assets inside of annuities and/or life insurance, because of the asset protection they can provide.
To take asset protection in Florida even a step further, not only is there no state income tax, but also if you pay your house off in full it is better protected under Florida law. Once your house is paid off, you can choose to put your non-qualified assets into annuities and/or life insurance, thus making it so that everything is better protected!
You see, Florida provides much more than just sunshine and waves!
One of the few remaining legal and legitimate tax shelters left is Cash Value Life Insurance. There is a minimum one can pay for a given amount of insurance coverage for a specific age. Who determines that? The insurance company, naturally.
They will tell you how much you must pay for indemnity on which they bear risk. Insurance companies and their actuaries calculate the least amount of premium they can charge and still make a profit.
But is there a maximum you can put into a cash value life insurance policy?
Yes. The government will tell you the maximum you can put into it. Why? Because of the tax advantages life insurance provides. Essentially, the government has decided the upper limit of tax-advantaged growth they will allow you to have.
That tells me that it must be a good thing, if the government regulates it. If you buy more life insurance than the limit set by the government, it becomes what is called a Modified Endowment Contract (MEC) and is no longer tax advantaged.