Most types of Life Insurance policies can qualify, including Universal Life, Whole Life, Term Life, Variable Life, and Joint Survivorship.
The Taxation of Life Settlements can vary from case to case and while we can note some general information regarding the taxation of Life Settlements we advise your and your clients seek advise from tax professional to answer your questions regarding taxation of Life Settlements.
The Life Settlement process can be quite simple:
- Client decides to Sell their policy
- The Insurance Agent or Financial Advisor contacts a Life Settlement Broker
- The Client receives Cash for the Policy and uses it as they see fit
A Life Settlement provider is the purchaser in a Life Settlement transaction and is responsible for paying the client a cash sum greater than the policy's cash surrender value. The top Life Settlement providers in the industry work with Life Settlement Brokers to fund many transactions each year and hold the seller's policy in a confidential asset portfolio and have in-house compliance departments to carefully review Life Settlement transactions. Most importantly, they are backed by institutional funds. Life Settlement providers must be licensed to buy policies in the state where the policy owner resides.
Viatical/Life Settlements are regulated by state Insurance Departments. Some states have enacted statutes addressing the sale of life insurance policies insuring non-terminally or chronically ill individuals and some have laws that only regulate the sale of life insurance policies insuring terminally or chronically ill individuals and others do not regulate the transaction at all. Of those states that regulate the transaction, most require both the Viatical/Life Settlement Broker (facilitator of the transaction) and Viatical/Life Settlement Provider (purchaser of the policy) to be licensed. Please call for state specific regulations.
A Viatical and/or Life Settlement is the sale of an existing Life Insurance policy for more than its cash surrender value but less than its net death benefit. The industry generally uses the term "Viatical Settlement" to refer to a transaction involving a terminally or chronically ill insured and "Life Settlement" to refer to a transaction involving an insured who is not terminally or chronically ill and is generally over the age of sixty-five (65). However, as defined in the laws and regulations of each state, these terms are not consistently used in this manner. For example, some states use the term "Viatical Settlements" to refer to any sale of a life insurance policy, regardless of whether the insured is terminally or chronically ill or not. And at least one state uses the term "Life Settlements" to mean the act of selling a life insurance policy, including ones in which the insured is terminally or chronically ill.
Viatical Settlement providers assist Life Insurance policy owners in selling their Life Insurance policy when circumstances may allow a policy owner exchange his or her policy for a lump sum of cash rather than wait for the death benefit to be awarded to the beneficiary or beneficiaries.
"IMS Settlements was transparent, fast, and delivered
an unbelievable offer for my universal life policy."