Are there restrictions on how I can use the proceeds from a life settlement? And answers to other life settlement questions

April 26, 2016
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Life settlements allow seniors an option for liquefying one of their largest assets, their life insurance policy. A life settlement occurs when an individual, business, or other entity sells a life insurance policy on the secondary insurance market for a lump sum of money. A third party then purchases the unwanted policy for an amount that is greater than the policy’s cash surrender value (CSV). The lump sum of money received from the sale is the policyholder’s proceeds.

How can you use the proceeds from a life settlement? 

Proceeds from the sale of the policy can be used for anything. There are no guidelines in place for how this money has to be spent. Further, there is not credit check or income check required.

Because a life settlement broker earns commission once the deal is completed, there are no upfront fees for a life settlement transaction.

Common uses of proceeds

Many policyholders who choose to sell their policy once they no longer need it do so to pay off debt. Others use the proceeds to pay for medical treatment and medical bills. Others use the money to obtain in-home care for themselves or their loved ones.

On the other hand, other policyholders wish to buy another asset, such as a house, pay for a college education, or purchase a business.

Can businesses sell life insurance policies?

Businesses are able to benefit from the sale of a life insurance policy.

Why would a business sell a policy?

A business may choose to sell a policy for the same reasons others would choose to sell a policy. Many business owners use these funds to transfer the business to their children.

Businesses may choose to sell a policy when their business’ internal structure changes. Business owners may want to pay off debt, buy more stock in the company, or purchase shares from other shareholders in the business.

Expert assistance

Seek expert assistance before making any financial decisions. Tax guidelines vary depending on the policy type, so speak with your tax attorney prior to making any decisions regarding the sale of your unwanted policy.

If you or someone you care for has an unneeded life insurance policy, contact us. We offer a complimentary evaluation of your policy that may help you determine if a life settlement is a wise choice for you and your family

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