When is it Time to Consider a Life Settlement?

Here is when Life Settlement makes sense:

• The policy holder is no longer able to pay the policy premium and is considering letting it lapse or surrendering it to the insurance company.
• The policyholder has outlived his or her beneficiaries.
• The policyholder’s health status has changed and cash for medical costs is necessary.
• There is a change in ownership of a company, retirement or a key executive has left. When a business has been sold or participants have exited, a policy to finance a buy-sell agreement or a deferred compensation plan is no longer needed.

A Life Settlement may also provide advantages that a 1035 exchange cannot. A 1035 is a provision in the tax code allowing for the direct transfer of accrued funds from one life insurance policy to another without creating a taxable event. However, a life settlement is preferred to the tax-free exchange of accumulated policy value because it may provide more funds, even after taxes.

Policyholders can also donate the funds from a life settlement to a charity. It serves as a tax write-off, and the donor can also see his largesse in action during his lifetime.

Regardless of the reason, a life settlement is always a better option to a policy lapse or surrendering it back to the insurance company.