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 […]
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 […]
What Types of Life Insurance Policies can be Sold for Cash?

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 […]
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 […]
7 Factors That Will Determine the Amount of a Viatical or Life Settlement (Sale of an Unwanted Life Insurance Policy)

The amount of the settlement that is received will be impacted by the following factors. Understanding these factors will help you make decisions regarding your policy, and if it is advisable to sell it: The insured’s life expectancy – The shorter the period until the insured is expected to die, the more the settlement company […]
Alternatives to Viatical or Life Settlement (Sale of an Unwanted Life Insurance Policy)

It is important for insurance planners to do all they can to protect their clients who may be contemplating entering into a viatical or life settlement. First, however, there needs to be a decision about whether or not the policy needs to be sold and whether any of the below alternatives might be in the […]
Tax Implications of Viatical or Life Settlement (Sale of an Unwanted Life Insurance Policy)

To The Seller As a general rule, anytime a life insurance policy is sold to an unrelated third-party investor, the proceeds are taxed according to guidance issued by the IRS in 2009. This guidance will generally govern the taxation of life settlement proceeds. However, as is discussed later in this section, a couple of major […]
Disadvantages of Viatical or Life Settlement (Sale of an Unwanted Life Insurance Policy)

Unless otherwise noted below, viatical and life settlements share many of the same disadvantages. Knowing them will help you make the most educated choices regarding your policy, and whether or not is advisable for the policy to be sold: Reduced total payout for dependent spouse and children – once the policy is sold, it will […]
Advantages of Viatical or Life Settlement (Sale of an Unwanted Life Insurance Policy)

Viatical Settlements The principal advantage is that terminally ill or severely chronically ill insureds can receive advanced payments on policy death benefits potentially free of income tax. If the insured is terminally ill, he can use the proceeds for virtually any purpose desired. For example, insureds may desire to use the proceeds to: cover out-of-pocket […]
When to Consider a Viatical or Life Settlement (Sale of an Unwanted Life Insurance Policy)

The emotional stress of dealing with one’s own impending death due to a terminal or serious chronic illness is further compounded by the customary increase in medical bills and the additional costs of special care in conjunction with a likely reduction in earning capacity. A viatical settlement may make sense for an insured in this […]