Donating a life insurance to a non-profit or charitable organization is fairly common. The donation of a life insurance policy to a charity favors both the donor and the recipient. A gift of this magnitude will typically results in an income tax deduction for the donor.
In the early 1980s, the worry of a life insurance company going bankrupt or insolvent was a rarity, which quickly changed during the 1990s when some well-known insurance companies were placed into receivership. In fact, insurance companies cannot declare bankruptcy; instead, they are placed into insolvency receivership or liquidation by the state’s insurance department.
In order to receive the death benefit of a recently deceased insured, you have to file a death claim through the life insurance company. This may be a problem if you do not know which company held the insured’s life insurance policy. Here are some helpful tips to both finding a policy and keeping it safe for your beneficiaries to find.
Can a Viatical or Life Settlement (Sale of an Unwanted Life Insurance Policy) be Used to Remove a Life Insurance Policy From One’s Estate?
For the individual who will not live more than three years, a transfer of an existing policy to an irrevocable trust or a third person will be ineffective to avoid inclusion of the policy in the gross estate at death. For example, an individual who owns a $500,000 life insurance policy on his life and […]
In the event of the insured’s death, the primary beneficiary must file a claim report in order to receive any benefits. If everything was planned accordingly, all you should need to do it contact the life insurance company and the insured’s employer, fill out the necessary paperwork, and provide the insurance company with a certified copy of the death certificate.
Special Rules to Know Before Engaging a Viatical or Life Settlement (Sale of an Unwanted Life Insurance Policy)
Since a variable life insurance product is treated as a security, the settlement of a variable life insurance policy is subject to Financial Industry Regulatory Authority (FINRA) best practices standards that apply to broker-dealers and registered representatives. The five primary areas of concern that FINRA identified for its members engaging in settlements of variable life […]
An irrevocable life insurance trust is when the trust is the owner of the insurance policy, which keeps the proceeds of the life insurance out of the taxable estate. Also, gifts can be made to fund the premiums, which will ultimately reduce the taxable estate. After your death, the trust’s assets – also known as the insurance proceeds – are available to your beneficiaries income-tax-free.
Single life policies are generally much more attractive to viatical and life settlement providers. A viatical settlement of a survivorship policy is unlikely due to the fact that both insured’s would have to be terminally ill or have very short life expectancies. The life settlement market for survivorship policies isn’t much better, because the settlement […]
Historically, one of the main reasons to set up an irrevocable trust has been to avoid or minimize any potential estate tax, but now there are other planning purposes for these trusts. An advantage of life insurance trust is that it removes the life insurance from the estate of the insured. You should carefully consider who the trustee is and discuss the ramifications with your attorney.
5 Considerations to Consider Before You Enter Into a Viatical or Life Settlement (Sale of an Unwanted Life Insurance Policy)
Planners and insureds who are contemplating life settlements or viaticals should also take the following into consideration. This will ensure that the best possible decisions will be made in regards to policy decisions. These considerations are: Confidentiality and beneficiaries – Most companies stress the confidential nature of the transaction but they require the named beneficiary […]