MAGNA LIFE BLOG
Term life insurance is one of the most affordable policies in which people can invest. As America’s most common form of life insurance, this type of policy insures that families are secure, should anything happen to the policy owner. The purpose of having term life insurance is to replace the income in your absence that you would otherwise be able to produce for your loved ones or your business.
How Does Term Life Insurance Work?
Unlike other forms of life insurance, this type of policy can be taken out for 10, 20 or 30-year terms. This type of insurance also tends to have a much lower monthly premium compared to Whole Life and Universal Life insurance policies. If you continue to pay your premium long after the term is up, you automatically renew the policy for another term equivalent to the initial term. If your policy ends and you choose to buy another term life insurance policy, your policy premiums will likely increase. The younger and healthier you are, the lower the premiums. If you decide to convert your term policy later in life, you won’t have to provide proof of insurability or show that the policy owner is in good health. Lastly, a policy owner does not collect anything at the end of the term, provided that he/she is still living.
Converting Your Term Life Insurance Policy for Withdrawal
Term life insurance can be converted into another type of policy that carries a cash value, which means you would have access to withdraw a designated amount from the policy. The withdrawal would be based on the cash value of the policy. Keep in mind that when withdrawing, you are surrendering a portion of the policy’s total value. Permanent, Universal, Cash-Value and Whole Life insurance policies have the option for cash withdrawals.
Selling Your Term Life Policy for Cash
Contrary to popular belief, you can sell your term life insurance policy to a life settlement provider, like Magna. Because a life insurance policy is personal property, a policy owner can transfer ownership to a life settlement provider. In exchange, the provider provides a cash payout to the policyholder and then assumes responsibility for all future premium payments.
Interested in finding out what your policy may be worth? Use the Magna Life Settlements Calculator to get an estimated payout value for your policy today.
It’s the time of year again for filing taxes. While no one wants to pay taxes, this is especially true for retirees who may have limited income or are living on a set budget. No matter the situation, there are options for retirees to help reduce taxes owed and possibly come out with a refund.
Here are some tips to help retirees have an easier tax season:
Free Tax Preparation
Leave the number crunching to the professionals. Free tax preparation is available to people who make $54,000 or less. The Volunteer Income Tax Assistance (VITA) program has IRS-certified volunteers to help people with tax preparation. Those who are 60 years or older may also receive tax help with questions about pension and other retirement-related matters through the Tax Counseling for the Elderly (TCE) program. Locations are available at community and neighborhood centers, libraries, schools, shopping malls and other locations. To locate a VITA or TCE site, call 800-906-9887 or use the online VITA Locator Tool.
Some Medical Expenses Are Tax-Deductible
Medical expenses can include Medicare premiums, long-term care premiums, co-pays at the doctor’s office and the cost of prescription drugs. A deduction on such medical expenses can be claimed in your tax filing if the total out-of-pocket costs exceeds 10% of your adjusted gross income.
Deduct Property Tax and Mortgage Expenses
If you’re a homeowner with an existing mortgage, the mortgage interest and property taxes you pay are deductible in your tax filing. Many times, retirees who are homeowners may also sell their home to downgrade to one that is more suitable for a retirement lifestyle. In that case, there is capital gain exclusion available for up to $500,000.
Certain Donations Are Tax-Deductible
There are many ways to be charitable, including giving away money or donating goods like clothing, a car, or electronic devices to charity. When you itemize the items you donate, you can claim a tax deduction. In some cases, travel to make the donation may also be included in the deduction.
Review “Standard Deduction” or “To Itemize”
The IRS offers the option to file your taxes using a standard deduction or to itemize. The standard deduction for retirees who just turned 65 is $7,900 for a single filer and $15,200 for a couple filing in 2017. The standard deduction is higher for those age 65 and older. Weigh your options in selecting how you want to file your taxes.
Understand How Life Settlement Proceeds are Taxed
If you took a life settlement, you only need to claim income on any proceeds that were more than the cost of the life insurance policy. You can calculate this by subtracting the policy’s cash value from the amount paid in premiums. Learn more about the tax benefits of selling your life insurance policy.
Streamline the Tax Filing Process With E-Filing
If you’re expecting a refund, e-filing your taxes will help speed along the process. One of the benefits of online filing is that there’s no waiting around for a check to come in the mail if you opt for direct deposit, or worse: it getting lost in the mail. Expedite your tax filing by taking care of it electronically.
Tax filing season does not need to be stressful and you can possibly look forward to a refund following some of the tips offered here.
Life settlements are a great financial option for people who find they no longer need coverage, whose circumstances have changed or who are experiencing financial hardship. This is especially true for senior citizens whose policy premiums have risen beyond what they may be willing to pay. It’s also a way for someone to put extra funds aside for unforeseen expenses, a luxury item they want or a once-in-a-lifetime trip they would like to take. What people may not consider when thinking about selling their life insurance are the tax benefits.
First Things First: Reasons to Sell a Policy
Before diving into the tax benefits of selling a policy, it’s important to understand why individuals may want – or need – to sell their life insurance policy. Perhaps the policy was purchased to provide for one’s children, but is no longer needed. The policy owner’s children may have attained their own success, are financially well-off and no longer need the money a life insurance policy would provide. Taking a life settlement would provide the policyholder with the funding to meet the rising cost of medical needs as they age, thereby reducing the risk of becoming a financial burden to their children.
Likewise, life insurance policies purchased with a spouse is another leading reason why policyholders sell their life insurance. If life insurance was purchased with a spouse and the couple has since divorced, the policy may no longer be necessary if the couple does not have children. Additionally, someone may want to sell their policy if their spouse has passed away. Taking a life settlement in these instances would provide the funding for relocating closer to family, traveling or ticking items off a “bucket list.”
The High Cost of Premiums and Medical Care
For many seniors, retirement means living on a budget. High life insurance premiums oftentimes become a major financial burden and are no longer affordable. Rather than letting the policy lapse or accepting the cash surrender value, taking a life settlement can actually result in a significant increase in the amount of cash received. Settlement money can be put towards living expenses, paying off debt or offsetting large medical expenses.
As we age, the cost of medical care increases and may become a financial burden to both the person requiring the care and their spouse or family members. A person may decide they would be better off if they had Medicaid but in order to qualify, they need to liquidate their assets. By taking a life settlement, a person would be able to pay off their medical expenses or put aside money for future medical needs. Liquidating their life insurance policy by taking the life settlement would also increase their chance of being able to file for Medicaid – all excellent reasons for taking a life settlement!
Evaluating the Tax Benefits of a Life Settlement
When considering whether or not taking a life settlement is the right course of action, factor in the taxable aspect of the settlement.
According to IRS Publication 554, when a life insurance policy is sold for cash, one must claim as income any proceeds that are more than the cost of the life insurance policy. This is calculated by subtracting the policy’s cash value from the amount paid in premiums. If the policy’s cash value is less than the amount already paid in premiums, no taxes would be owed. Should the cash value be more than the amount paid in premiums, the difference would be taxable income.
All over New York you have seen TV commercials, newspaper advertisements, and the Internet are abuzz with life settlement promotions. All this publicity and advertising has come about for good reason. Life insurance settlement has grown into a billion-dollar industry. Its popularity stems from the benefits it supplies to seniors and others who no longer need their life insurance. If this seems like a win-win, that’s because it is. Life settlements increase the policyholder’s quality of life and financial health, but all of this only makes sense if policyholders no longer need their life insurance policies.
How does it work?
Life settlements are transacted by life-settlement providers. The policyholder contacts the life settlement provider, who verifies the policyholder’s eligibility. Institutional investors, such as hedge funds, buy the policies. The provider then pays the policyholder, minus any applicable fees.
How much are life settlements?
Settlement amounts depend on the size of the policy’s death benefit. Settlements are always higher than the cash surrender value of the policy but lower than the death benefit. For example, if a policy has a death benefit of $100,000 and a current cash surrender value of $10,000, the settlement amount would be between these two numbers. The amount depends on what the investors are willing to pay and how competitive the marketplace is. Investors weigh how long they expect it to take for their investment to pay off. How do investors profit? The investor’s profit is the difference between what they pay for the policy and the death benefit. Under life-settlement contracts, the investor receives the benefit when the policyholder dies. For example, if an investor purchases a policy with a $100,000 death benefit for $50,000, the investor revenue is $50,000. The investor realizes the profit when the insurance company pays the death benefit but must continue to pay premiums each year and must realize a gain for the time value of money.
Who should employ a life settlement?
A life settlement should be employed by policyholders who no longer have the need for a death benefit. Often, this is the case with elderly people. They may have purchased the policy during their working years in order to protect their children in the event of their untimely death. Now that the children are grown, they realize the death benefit is no longer necessary. If they need the cash now, it makes sense to enter into a life settlement.
Is a life settlement a better option than cash surrender?
A cash surrender and a life settlement both eliminate the death benefit for the policyholder’s beneficiaries. Because the life settlement pays out more than a cash surrender, it is the better option.
Who should not employ a life settlement?
Anyone who wants the death benefit to go to their named beneficiaries.
What type of life insurance policies qualify?
Whole life or universal insurance policies qualify for life settlements. Term life qualifies if the policy is first converted to whole life or universal life. Many term policies offer policyholders the guaranteed right to convert some of their term coverage to whole life.
Please check out all states that Magna Life Settlements is currently servicing on our Life Settlements Map.
A Wall Street Journal recent article entitled “Millions Bought Insurance to Cover Retirement Health Costs. Now They Face an Awful Choice”, discussed the recent trend of increases in rates for Long-Term Care insurance. The article discusses how many people were told that they would have level premiums to cover medical needs in the future. These consumers paid their premiums and kept their end of the bargain, only to be told that the insurance companies did not correctly estimate the costs and the risks.
This story is analogous to the recent trend in life insurance, where consumers were illustrated a premium stream at purchase. Later, when the insurance companies determined that they were not making the profit they had expected, they have sought to raise premiums after the fact to pass along this miscalculation to the insured.
This article quotes the president of Genworth Financial, Inc., a large seller of long term care insurance, as saying that the companies should never have priced the products as they did, and that the regulators should never have allowed it.
In both the life insurance and the long term care cases, consumers who believed what they were told, and paid their premiums, are now having the rug pulled out from under them. There were companies a decade ago who priced their policies correctly. These carriers suffered as consumers flocked to the more cheaply priced policies. Now the companies who priced the policies correctly do not need to change pricing, while those who undercut and mispriced policies are doing so.
This should not stand. If insurance companies, with scores of actuaries, price products incorrectly, they should stand by that pricing. When they are more profitable than expected, they don’t lower prices and give money back to the insured. Why should it work the other way?
Faced with this dilemma, American seniors must get creative about how to pay for long-term care or risk a major hit to their retirement funds.
The National Association of Insurance Commissioners (NAIC), the U.S. regulatory support organization created by the chief insurance regulators from all 50 states, formed a Long-Term Care Innovations Subgroup to study this issue. The group recently issued a report that identified some viable options for privately funding long-term care costs. Four specific options they laid out included the following:
• Single Premium Permanent Life Insurance Policies
• Annuity Long-Term Care Hybrid Policies
• Impaired-Risk Payout Annuities
• Life Settlements.
Of these long-term care financing options, a life settlement is the only one that does not involve seniors buying anything or spending any money out of their own pockets.
A life settlement is a proven strategy for generating cash from an unwanted or unaffordable life insurance policy. In a life settlement transaction, a senior sells his or her life insurance policy to a third-party investor for an immediate cash payment. The investor then takes over the premiums on the policy and collects the death benefit when the insured passes away.
We’re all now aware that recent tax reform law is the first major tax overhaul since 1986 when Ronald Reagan was President. Noteworthy provisions: the standard deduction has doubled, tax rates are lowered and fewer people deal with the alternative minimum tax. None of this will likely affect 2017 taxes. However, four less-publicized tax reform elements will encourage life settlement growth in an already robust environment.
- Taxes on a life settlement will reduce.
The new law simplifies and reduces taxes by allowing all premiums paid to be included as the cost basis. The previously unfavorable 2009-13 ruling required sellers to remove the cost of insurance (COI) from their premiums when calculating the cost basis. This not only increased tax due, but also made it very difficult to determine a policy’s COI.
- A great majority of Americans are exempt from estate tax.
Before tax reform, few estates were subject to the estate tax, which applies to the transfer of property after someone dies. Now, even fewer people have to deal with it. The amount of money exempt from the tax — previously set at $5.49 million for individuals, and at $10.98 million for married couples — has been doubled. Now less than 0.1% of all estates are expected to be subject to estate tax.
- There’s a new tax credit for non-child dependents, like elderly parents.
Taxpayers may now claim a $500 temporary credit for non-child dependents. This can apply to a number of people adults support, such as elderly parents.
- More medical expenses can be deducted.
For the next two years, filers can deduct medical expenses that add up to more than 7.5% of adjusted gross income. In the past, the threshold for most Americans was 10% of adjusted gross income.
A life settlement is the sale of a life insurance policy for a value in excess of the policy’s cash surrender value, but less than its face value, or death benefit. A policy owner receives a cash payment, while the purchaser of the policy assumes all future premium payments and receives the death benefit upon the death of the insured. According to the Life Insurance Settlement Association (LISA), “An astounding $100 billion+ in face value of life insurance is lapsed or voluntarily surrendered each year by seniors over the age of 65.”
Obviously, paying less tax on a settlement will make it more attractive under the new tax reform, but we expect the other elements mentioned to also encourage policy owners and their advisors to actively consider life settlement options.
With respect to the estate tax exemption, many policy owners now recognize their modest estate no longer requires the tax planning provisions offered by their life insurance policy. For caregivers, the tax credit is likely to encourage more financial understanding of their elderly parents’ finances and the options life settlement affords them. Lastly, more medical deductions may incur more medical expenses which are often paid from proceeds of a life settlement.
Magna believes there is a tremendous opportunity to increase awareness, especially in light of the recent tax reform law increasing the federal estate tax exemption, which may eliminate the need for many policies purchased as an estate planning tool. In those cases, a life settlement may be a reasonable financial planning option. Try our Magna Life Settlement calculator to see if a life settlement is an option for you or your client. http://www.magnalifesettlements.com/calculator
David Serra, President of Magna Life Settlements said of the reform, “Policy owners are rapidly recognizing life settlements as a compelling alternative to surrendering unwanted life insurance policies. Now more than ever, there is a tremendous opportunity to increase awareness so that the potential untapped value of an unneeded life insurance policy can be maximized, especially in light of the recent tax reform law.”
About Magna Life Settlements and Vida Capital Management
Magna Life Settlements has been active in the life settlement industry since 2004 and was acquired by Vida Capital Inc. in 2010. Headquartered in Austin, TX, Vida Capital is an institutional asset manager with over $2.6 billion of assets under management focused exclusively on providing longevity-contingent investment solutions to institutions and individual investors. Vida specializes in the structuring, servicing, financing, and management of life settlements, synthetic products, annuities, notes, and structured settlements. Vida’s senior management team has over 100 years of life settlements and life insurance experience and extensive knowledge of alternative investing. For more information, please visit http://vidacapitalinc.com.
Clay Gibson, Managing Director, Policy Origination
AUSTIN, TX JANUARY 5, 2018 – Magna Life Settlements, a multi-billion dollar originator of life settlements, announces the promotion of industry veteran Clay Gibson to Senior Vice President, Origination and the hiring of Scott Harris as Chief Marketing Officer. Along with the key hires and promotions, the company is expanding its space and moving to downtown Austin.
Clay and Scott will report to Dave Serra, President of Magna Life Settlements (“Magna”), a wholly owned subsidiary of Vida Capital Inc.
Dave Serra, Senior Managing Director, said of the key hires, “We are excited to announce these new hires and promotions which will improve our focus and execution in both the secondary and direct markets to best serve the rigorous expectations of our policy owners.”
Clay will manage all secondary policy acquisitions from direct and indirect sources for Magna.
Scott Harris comes to Magna as Chief Marketing Officer. With 20+ years of experience, Scott was Co-Founder/CEO of Social Factor. Scott previously served in marketing leadership with Premiere Global Services, Dell, Austin Ventures, and Merck. At Vida, Scott’s primary focus will be on developing materials and programs to increase awareness and educate policy owners and influencers of the potential benefits of accessing the life settlement market. He has a BS in Engineering and an MBA from The University of Texas at Austin.
Magna believes there is a tremendous opportunity to increase awareness, especially in light of the recent tax reform law which raised the amount to be excluded from the federal estate tax, of policy owners who previously used insurance as an estate planning tool.
Jeff Serra, Vida Founder and CEO added, “Policy owners are rapidly recognizing life settlements as a compelling alternative to surrendering unwanted life insurance policies. For almost a decade, Magna has led the market in offering a fair market value to policy owners in every state while also delivering compelling returns to investors. With our new team members and changing responsibilities for our most experienced employees we hope to continue to serve the needs of our growing list of constituents.”
Healthcare costs are higher than they have ever been, and the increase doesn’t appear to be slowing anytime soon. Medicare covers only a portion of healthcare costs in retirement, leaving you on the hook for what will likely be a significant chunk.
You aren’t totally powerless against this expensive burden, however. There are strategies and lifestyle design choices that can lessen the effect that these rising costs will have on you. Let’s look at five ways to handle rising healthcare costs when planning your retirement.
Annuity with Rising Income
It’s common knowledge that annuities are a tried-and-true method of funding a retirement. For the uninitiated, an annuity is a long-term contract between an individual and an insurance company which guarantees that in exchange for a lump-sum premium or a series of premiums the insurance company will guarantee an income stream that can last for a certain number of years – or even for an entire life.
What many people may not realize is that some annuities offer income streams that can increase over time. Generally, these incomes increase by a certain percentage per year, offsetting the effects of rising costs.
Are you paying monthly premiums on a life insurance policy that you no longer need? Maybe you’re “over-insured”, or for some other reason, your loved ones aren’t as financially dependent on you as they once were. What you may not know is that you can be relieved of those expensive premium payments, and make money doing so.
A life settlement involves selling your life insurance company to a company who will take over as owner and beneficiary. The settlement company will continue paying the policy premiums until your death, and in exchange, they will pay you a lump sum of cash, which you can use for whatever you see fit – including saving for healthcare costs.
Downsize your Home
Many retirees have the advantage of being free from mortgage payments by living in a home that is paid off. If you’re living in the home in which you raised your family, though, do you really need all that space? Even if you have no mortgage payment, a lot of your budget can be eaten up by property taxes, insurance, repairs and utilities.
For some, selling their home and downsizing is the answer. This can provide extra cash that you can invest or simply save for those inevitable medical costs which aren’t getting any cheaper.
There’s no rule that says you have to retire at a certain age, and many people are finding that working into their later years is rewarding and keeps them feeling young. Delaying retirement gives your assets more time to grow, and every year that you remain in the workforce lessens the burden on your portfolio to take you through your final years.
You don’t have to continue working full-time, either. Some employers allow workers to ease into retirement by going from full-time to part-time. You may also find a new “side-hustle” that gives you pleasure and brings in some extra money in the process. Reaching retirement age doesn’t necessarily signify the end of your money-making years.
Stay active and healthy
You may not have control over the cost of healthcare, but the extent to which you need it can be determined in part by your lifestyle choices. Staying active, eating a nutritious diet, and limiting unhealthy behaviors can help keep you out of the doctor’s office and hospital. This means less of your retirement dollars going to medical bills, freeing up cash for what you choose to do with it.
Retirement is a big deal for virtually everybody. Those fortunate enough to live into their golden years have often spent decades upon decades mapping out how they’d save their money. However, once one reaches retirement, it’s impossible to go back in time and plan for retirement more appropriately.
As such, it’s important to plan for retirement far ahead of schedule. Unfortunately, the majority of United States citizens aren’t taught how to manage their money, especially for retirement – making sense of 401(k) retirement accounts, IRAs, reverse mortgages, and the like is often extremely difficult.
Let’s glance over six pitfalls every upcoming retiree should avoid when planning for retirement – pay attention, take notes, and remember – you’ll be planning one before you know it.
Pitfall No. 1: Underestimating Your Future Cost of Living
Too many seniors underestimate their future cost of living. Doing so can cause you to deplete your saved-up stores of cash too quickly. If anything, overestimate what living for the next thirty to forty years will cost, and adhere to such a plan.
Pitfall No. 2: Not Maximizing Employer-Sponsored Retirement
A majority of employer-sponsored retirement plans feature employer matching up to a certain portion of your income. For example, if an employer offers matching up to 8% of earnings, and you earn an income of $100,000, you could put away $8,000, with your employer matching another $8,000.
That’s free money in the amount of $8,000! While you typically can’t withdraw such retirement income without significant penalties, it’s silly of you to turn down such extra payment.
Pitfall No. 3: Actively Investing Retirement Funds
Investing, in its simplest form, involves converting currency into commodities, bonds, stocks, mutual funds, and other assets that may fluctuate in value. If the overall value of such assets rises over time, some investors would tend to think their investing strategy is good enough to operate their portfolio in real-time, without holding them for several weeks, months, or years. Almost always, active investing is a mistake, often resulting in substantial losses due mostly to human judgment error and making bad decisions thanks to cognitive biases.
Always, always, always hold your retirement portfolio as a passive investor. Any growth-stock mutual fund worth its weight in salt will generate substantial returns over the long-run. To clarify, passive investing means to place your assets in safe investments and hold them for years at a time, or at least rarely sell your holdings once they’ve been purchased.
Pitfall No. 4: Buying New Vehicles
Cars, trucks, boats, recreational vehicles (RVs), and other vehicles depreciate over time, meaning you’ll lose most money you put into such vehicles. As such, you should aim to own a used vehicle older than four years of age.
Pitfall No. 5: Not Having a Plan in the First Place
If you don’t have a plan, your retirement is in big trouble. Get a sensible, reasonable plan immediately.
Pitfall No. 6: Holding Substantial Stock from Past Employers
Employers often offer stock as compensation, which increases loyalty and drive in the workplace. However, once you retire, you should sell off such stock and diversify funds immediately.
Many people purchase life insurance. However, life insurance payouts can only prove advantageous if you pass away, meaning only others can benefit from the redemption of such policies. If you have a life insurance policy, consider setting up a life settlement, in which you sell it to a third party for more than the surrender value, but less than the net death benefit.
Viatical settlements are usually in reference to the sale of someone’s life insurance policy who has been diagnosed as terminally ill, with a life expectancy of 24 months or less. The person who is sick will sell their policy to a viatical settlement provider that is specifically licensed to do the transaction. The provider is usually executing the transaction on behalf an investor funding the viatical settlement. They will offer a lump-sum cash payment equivalent to a percentage of the face value of the life insurance policy. Some states have regulations regarding minimum settlement amounts, which can be as high as 80% of the face value of the policy for terminally ill “viators.” The main reason that people in this type of situation sell their insurance policies is because they need to use their money before they pass away instead of leaving it to a beneficiary. Some specific reasons many people do this is to pay for medical care, living expenses or to make memories before dying.
Another type of similar transaction is a life settlement. This transaction is virtually the same, only the “settlor” or seller of the policy has a greater than 24 month life expectancy. Settlement amounts are often 6-8 times higher than the cash surrender value that a carrier is willing to give. In many cases, people no longer needing or who are unable to afford their policies just stop paying on them, causing them to lapse into worthlessness. Life and viatical settlements enable the policy owner to realize value where they might have previously thought none existed, thereby improving their financial condition while they live.
Who Is Able To Buy Life Insurance Policies?
As stated earlier, policies are typically bought by viatical and life settlement providers. They are able to buy policies using funds provided by investors or loans from other financial institutions. According to the Internal Revenue Code, a provider of a viatical or life settlement is a person or business that regularly buys or takes ownership of contracts of life insurance policies. The purchaser will make a profit by getting the full face value of your policy once you pass away, even though they only paid you a portion of it. This is because they have to keep the policy in force by paying the premiums until it matures. It is important to note that once you sell your policy, your beneficiaries will no longer get a payout once you pass away. Most reputable viatical or life settlement providers require beneficiaries to acknowledge the settlement before any money is paid to the seller of the policy.
How Much Is My Life Insurance Policy Worth?
The amount you will actually receive is going to depend on a number of factors including how much your policy is worth, how much the company will spend on your insurance premiums, and your projected life expectancy. Typically, the longer you have left to live, the less you will be given for your policy.
How To Pick A Viatical or Life Settlement Company To Sell To?
Viatical and life settlement companies or individual providers need to be licensed or registered with a state’s department of insurance. Only 7 states in the U.S. are not regulated. However, settlements can still be effected in those states, and most providers use best practices where no regulations exist.
Before selling your policy to a provider, be sure they are licensed or registered, where applicable, to legally buy your life insurance policy in your state as well as what the state’s requirements may be. This is important for many reasons, not the least of which is because it may play a big role in whether or how the sale of your life insurance policy is treated for tax purposes. In addition, you need to be certain if there are any other fees involved with the sale after you sell it. Always consult a professional when considering the sale of your policy.
Should You Consider Selling Your Life Insurance Policy?
Selling your policy is a personal decision and there is no single correct answer. Below are some important factors to consider first:
•Are their any tax penalties for selling the policy?
•Are your beneficiaries aware of your need to sell your policy?
•Are there other ways to get the money you need for living expenses until you pass?
• Does your policy include a living benefit rider or an accelerated death benefit rider?
Income Tax Penalty Considerations
In a lot of cases, if you are terminally ill and have less than two years to live, you can sell your life insurance policy without any tax penalties. In other cases, if you have been diagnosed as chronically ill and not terminally ill, the funds you receive may only be tax free if you use them to pay for qualified long-term care services.
Again, always consult a professional if you have a policy you do not need or cannot afford, and you wish to realize its true value while you live.