Category: Legislative Updates

Life Settlement Taxation More Favorable Under Tax Cut and Jobs Act

As of December 22, 2017 with the passage of The Tax Cut and Jobs Act those who are entering into Life Settlements have another reason to celebrate. Bottom line is sellers no longer have to decrease their investment in the contract (cost basis) by the policy’s cost of insurance charges. This is a huge savings and could save thousands in income taxes. Revenue Ruling 2009-13 required basis in a contract that was settled to be adjusted by the carrier’s cost of insurance charges. Reductions in basis increase a policy holders taxable gain. The reversal of Revenue Ruling 2009-13 makes Life Settlements more appealing. Under the TCJA, the tax treatment for a life settlement is as follows: $0 to Cost Basis: No Tax Consequence Cost Basis to the Surrender Value: Ordinary Income Sale Proceeds Exceeding Surrender Value: Capital Gain   Three factors will contribute to Life Settlements being an attractive option for unwanted and unneeded policies. Continued low interest rate environment Favorable taxation to the Seller of a policy Increase in Estate Tax exemption, Trustees considering cashing out TOLI policies For more information, please contact The ASA Group at (501)...

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New legislation requires insurance companies to inform policy holders about their options

BY: LIFE INSURANCE SETTLEMENTS, INC. · JULY 6, 2017 On June 26th, 2017, Florida Governor Rick Scott signed legislation (HB 1077) into law that will require insurance companies to inform policy holders that they can receive additional information about ALL of their options, as it relates to their life insurance policy. This law basically paves the way for a policy holder to learn that he or she may be able to sell their policy in the secondary marketplace for more money. In most cases, a lot more money than simply surrendering their policy, or worse yet, letting it lapse. This is a major event for consumer disclosure in our country because Florida has the highest percentage of senior citizens among its population. Every year, millions and millions of dollars of life insurance death benefit/face value is lapsed or surrendered by thousands of policyholders, who obviously didn’t realize there was another option or that it had additional value. This law should help to rectify this trend and give seniors more money to improve their lives, whether it helps provide money for LTC, housing, medical costs or simply to ease the daily burden of living on a fixed income. According to the Government Accountability Office’s 2010 report on the life settlement industry, an average policyholder can expect to receive an average settlement that is seven times greater than the its current...

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