Tag: Life Insurance Settlement

Financial Cleaning Tips for 2019

life settlements blog

Millions of Americans, even those who are in their retirement years, have only a poor grasp of their finances. They do not know about the many financial instruments available to them on the open market. Many do not even have a dollar saved for retirement. It takes years to build up good financial habits. However, one easy step that every American can take is financial spring cleaning. Financial spring cleaning helps people understand and then make the most of their finances during a designated period every year.

Financial Cleaning: What you need to know in 2019 and beyond!

Know what you have

The first step of financial spring cleaning is to bring all of an individual’s assets and debts together. This task may be no small burden. In order to do this, an individual should pull together the account balances and financial statements that make up their financial lives. These statements may include every credit card and bill to pay as well. In addition to simple balances, display all of the fees and interest rates that they pay on these accounts.

Consolidate accounts

This effort leads to the next step in the financial spring cleaning process. They may want to cancel credit cards with high monthly fees. Checking or savings accounts that charge high fees should also be reviewed and possibly cancelled so that those funds can be transfered into low-fee accounts. The process for these account changes can be tedious and cumbersome. As a result, it’s important to come up with a step-by-step plan to handle each problematic account.

For those accounts and debts that cannot easily be handled with a trip to the bank, financial spring cleaning can involve a plan to pay off any debts that an individual may have. It is helpful to restart the process of debt payment and arrangement every year since new debts may have been accumulated throughout the year. The best way to pay off debts is to arrange them by their interest rate. Families may want to shift payments to where they are putting as much money as possible towards the debt with the highest interest rate and then only paying the minimum payment on all of the other debts. Then, once the debt with the highest interest rate has been paid off, the individual or family moves on to the next debt and the debt after that until all debts are paid off.


The next step is to look at goals. Financial investment and savings should always be oriented towards goals. Simply throwing money into an account will break down the moment a severe expense pops up. One suggestion is to make savings goals and then devise plans to achieve these goals. While goals need to be specific numbers, they should not be immutable or unchanging. People need to be able to shift their goals based on major expenses, changes in salaries, or other contributing factors. Financial spring cleaning is a perfect time during the year to adjust different goals. It often occurs several months after a January raise or bonus and right around the time of a tax refund.

Reevaluate holdings

Finally, individuals need to reevaluate their holdings and where exactly their money is. When they bring all of their funds together, they will learn how much money they have in stocks, bonds, and other types of accounts. They will also be able to easily view the performance of those assets over time. Each website for accounts has graphs and charts that allow an individual to view their own progress. Financial spring cleaning is a great time to analyze the percentages of their funds that they have in each asset class. In some instances, an individual may have their money in an asset class that will most likely lose money in the short-term or the long-term. 

They may determine that they have too much risk or not enough to meet their goals. This is especially the case for people who are about to retire and have too much risk. They need to start tapping into the money in the near future and cannot withstand an unexpected drop in the stock or bond market of several percentage points. In those cases, they can use this time of reflection to shift their holdings around to different asset classes. This effort can be helpful in reaching the goals established earlier in the spring cleaning process.

Financial spring cleaning is a time for pause and reflection of an individual’s assets. It may not ensure that a person can immediately work their way out of debt or secure enough money for a comfortable retirement. However, it is critical for making money over the long-term and for reducing any confusion or inefficiency in an individual’s portfolio. Whether individuals have a large amount of money or almost nothing at all, everyone should at least consider a yearly financial spring cleaning.

Sell a Life Insurance Policy For Cash?

life settlement cash - sell life insurance policy for cash

With the promise of the insurer passing over a pre-determined amount of cash to your beneficiaries upon your demise, you are expected to pay monthly or quarterly premiums to the insurer. But what happens when you are unable to pay or feel like you don’t want to continue with the policy? Can you sell the life insurance policy to a third party and how much can you expect as the settlement? Most importantly, when is the best time to sell the policy to a third party?

Can you sell your Life Insurance Policy?

Yes. It is well within your rights to sell a life insurance that you no longer need to a third party under the life settlement clause. Ideally, the sale involves transferring your claim over the expected payout to a third party investor in exchange for cash. In effect, the investor offers immediate cash payment and continues paying the premiums up to the time of your passing when they can then claim the full settlement from the insurer.

How much cash can you expect from the sale?

How much you receive from the life insurance sale depends on a host of factors set out by the third party investor. In most cases, the investor considers such factors as the value of the policy, your current health condition, and age.

The average settlement ranges from 20 to 25 percent of the value of your policy. The subject is nonetheless open to negotiations, and this has seen the settlement value shoot to as high as 50 percent of the policy size. You should, however, note that not every subscribed life insurance qualifies for settlement.

Eligibility for life insurance policy sale

Almost every third-party life insurance investor has eligibility criteria that they use to screen individuals seeking to sell their life insurance. Nonetheless, some of the standard procedures followed by most investors include the fact that you must be above 70 years of age and have a policy value of more than $50 thousand. Most companies also prefer universal, whole, and convertible term life policies.

The regulations are, however, not set in stone. Plus, the stiff competition has forced some companies to accept policies for individuals aged 65 years. Most investors will also overlook the age limit, especially if the insured is terminally ill with a life expectancy of less than two years.

When does settling a life insurance policy make sense?

Non-payments of premiums

Insurance companies may decline to honor a life insurance claim if you stopped or have been inconsistent with paying premiums. Therefore, in the event financial constraints make it impossible to honor the regular premiums, remember that you have the option to sell the policy in a life settlement rather than allowing the insurance company keep the money.

Medical expenses and emergencies

When pressed by large medical expenses that need to be paid up front, you can always count on the proceeds of the settlement. Though saddening, health complications may in actual sense raise the settlement value of the policy where the investors project a lower life expectancy.

How to maximize the settlement amounts that get to your bank

Life policy settlement is taxable under income and capital gains. With the government taxing the settlement, the last thing you need is a broker or insurance agent seeking to dig further into the little left. Maximize the amount of the settlement that gets to your bank account by working with inexpensive agencies, and, if possible, reach out to the investor directly.

Use our Life Settlement Calculator today for a free quote on how much your Life Insurance Policy is worth!

Considering a Viatical Settlement in Times of Need

Viatical Settlement - Magna Life Settlements

We do our best to make sure our loved ones are cared for after we’re gone, and life insurance policies offer us one way to do that. But coming face to face with a terminal diagnosis can shift the tides and make a living benefit a better option than your loved ones collecting a death benefit.


Discover Hidden Cash in Your Term Life Policy

cash value life policy

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. Because a life insurance policy is personal property, a policy owner can transfer ownership to an investor. In exchange, the investor 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.

Are Life Settlement Proceeds Taxable?

tax life settlement

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.

How are life settlements taxed?

Life Settlement Tax - How are Life Settlements Taxed? - Magna Life Settlements

How are Life Settlements Taxed? Learn more with the Magna Life Settlements, Life Settlement Tax Guide today!

Recent landmark cases have brought many Life Settlement tax issues to light as the IRS itself has had issue with defining how life settlements are handled. Below you will find a brief guide covering how Life Settlements are taxed.

What is a life settlement?

A life settlement is a life insurance policy that is no longer needed. When the owner of the policy decides that they no longer want the policy, they have two options available to them. They can let the policy lapse altogether or they can choose to surrender the policy. The life settlement option presents an opportunity to sell the policy to an investor. The policy is generally sold to another party. These policies don’t involve terminally ill patients.

How do life settlements work?

There are actually life settlement companies that acquire these policies. They hold them until they reach the maturity stage, and then the net value of death benefits is collected. If the policy’s benefits aren’t collected, they can be sold to investors. The owner collects a lump sum payment as a part of the transaction. The amount received depends on your age and other conditions in the marketplace, but you usually end up with more than the cash surrender value. You won’t be able to collect the full death benefit amount.

What are the buyer requirements?

The buyer of your policy will take over the premiums for the remainder of your life. They will also pay you a lump sum at the time of the sales transaction. When you die, the death benefit is collected by the buyer of your insurance policy.

How life settlements are taxed?

The proceeds are treated as ordinary income. Whatever the net proceeds from the transaction is valued will be taxed as ordinary income. The amount paid into the premiums will be treated as capital gains. The remaining net proceeds after taxes from surrendering the policy after should be compared to after-tax proceeds received by surrendering the policy to determine if it makes sense to sell the policy.

In theory, the additional proceeds following a life settlement should cover any tax obligations. It is best to speak to a tax advisor prior to making any serious decisions regarding a life settlement. If the policy is not sold for a higher rate, the seller can lose by having to cash out for a lower sum of money.

Magna Life Settlements, Inc. and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Life Settlements in New York

new york life settlement

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.

5 Ways to Handle Rising Health Care Costs when Planning your Retirement

retirement life settlementHealthcare 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.

  1. 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.

  1. Life Insurance Policy 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.

  1. 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.

  1. Delay Retirement

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.

  1. 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.

6 Pitfalls to Avoid when Planning for Retirement

life settlementsRetirement 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.

Who Qualifies For A Viatical Settlement?

Life Settlement Qualification - Magna Life Settlements

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.

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