A life insurance policy is classified as a Modified Endowment Contract (MEC) when:

Question

Accepted Answer

Premiums paid exceed the 7-pay limit, causing distributions to be taxed LIFO with a possible 10% penalty before age 59½

Answer

The policy is a term contract with no cash value

Answer

The death benefit exceeds $1 million

Answer

The owner surrenders the policy within the first year

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