Because of insurance laws, there are also tax benefits of working with settlement companies and brokers. Unfortunately, in many cases, when an owner of a life insurance policy cashes out the life policy using other options, they usually face tax consequences such as paying income tax or estate tax on the income. These tax consequences are the same faced by institutional investors in the stock market all across the United States, and cut into the proceeds and decrease the amount of money you have available to you.
In contrast, with a life settlement, the entire settlement is tax-free, meaning you owe no additional funds to any financial institution or financial professionals. The Supreme Court determined that an insured person is well within their rights to sell their insurance on the secondary market. In fact, the secondary market and life settlement process are highly regulated, and the National Association of Insurance Commissioners reports very few complaints about the life settlement market from consumers.
In the 1980s, the AIDS epidemic in New York and around the globe sparked the true birth of life settlement company popularity. State laws in some of the following states of Minnesota and North Carolina, among thirty-one others, have mandated waiting periods before the life settlement process can even begin, further showing the due diligence helping regulate life settlement companies.
If you’re looking at different viatical settlement companies and trying to find a viatical company to work with, American Life Fund is here to help. We strive to make the settlement process as easy as possible for our clients, and our advisors will guide you through the life settlement process every step of the way. Get started by seeing if you qualify, or call us today at 877-421-0148.
For more information, see our blog on viatical settlement taxation