Attorneys and Trustees

l.i.f.e. Long Relationships

As the Life Settlement market continues to expand, attorneys and trustees will want to familiarize themselves with the legal and tax consequences related to this powerful financial instrument.

For example, a Life Settlement obviously will remove the corresponding life insurance benefit from a beneficiary’s estate. An estate attorney will want to assess any new probate concerns such a transaction may engender.

In addition, estate planners may want to ask themselves the following questions when assessing a client’s life insurance policy prior to making any recommendations:

  • If it is no longer needed, should the policy be surrendered?
  • Is a Life Settlement or a 1035 Exchange more appropriate?
  • If surrendered, should an annuity be purchased?
  • Are other coverage needs present?

Life Settlements can also affect estate planning in the following ways:

  • Eliminates expensive premiums
  • Creates income that the client may use in a number of ways
    • Donate to a favorite charity
    • Give to family member(s)
    • Use for personal needs
  • May provide an income tax deduction for clients

Tax Implications

When receiving a Life Settlement, the amount equal to the policyowner’s total premium payments (the cost basis) is generally 100% deductible. Then, the difference between the cost basis and the cash surrender value of the policy is generally taxable as ordinary income. Finally, the amount received that exceeds the cash surrender value is generally taxable as a capital gain.

Of course, individuals are strongly urged to consult their own tax professionals to discuss their individual tax situation before entering into the Life Settlement process.

Due Diligence

Not only are attorneys encouraged to perform due diligence before recommending Life Settlement as a course of action for their clients, but they are also encouraged to perform due diligence on any firm that will be performing settlement services.

Because the field of Life Settlements is a relatively new one that is gaining wider acceptance with each passing year, efforts are underway in several states to create new regulations governing the secondary market for life insurance. There is even a movement that is urging the adoption of a national set of regulations. Current regulatory efforts vary widely from state to state.

For more information on compliance in any of the 50 states, click here.

We Look Forward to Teaming with You

Ashar Group, LLC is a recognized leader in the field of Life Settlements. Our dedicated team of licensed professionals has been active in the secondary market for life insurance since its inception.

As an industry innovator, our comprehensive range of services includes an in-house medical director and legal counsel, allowing us to handle all facets of the settlement process. Typically, this means we can complete the process in a shorter time period and with less paperwork.

Our independent status, competitive bidding process, years of negotiating experience, and solid relationships with multiple funding sources ensure the highest valuations for your client’s life insurance policy.