The primary difference involves the insured’s life expectancy. In a life settlement transaction, the policy owner is typically a senior over the age of 65 with a life expectancy of less than 15 years. People choose to sell their life insurance policies when they find that the policy is no longer wanted, needed, or can no longer be afforded. When it comes to life settlements and viatical settlements, choosing the appropriate route is not always as easy as it may seem. Life insurance policies carry a cash value with them in which you can sell to a third party buyer in return for monetary funds. In situations when individuals no longer want or can afford their policy, many times, they will simply let their life insurance policy lapse. All those years of paying into the policy will reap no return for the policyholder, and large sums of money will be lost.
A viatical settlement is the sale of an existing life insurance policy at a discount form its value for cash. This type of settlement is offered when the insured is terminally ill — designed specifically for those who have a two to four-year life expectancy. If an individual knows they will have costly medical bills that need to be taken care of upon their death, they will invest in a viatical settlement to ensure that their family is not left with the financial burden of paying off those bills. The idea is that the money the terminally ill gets from the settlement is to go towards medical expenses during this two to four year period. Since viatical settlements are based on the speculation of death, it’s essential that potential policyholders fully comprehend the basics of viatical settlements in relation to their current situation. Due to the time value of money, the longer the life expectancy rate, the cheaper the policy will be, and the longer an individual lives, the lower the return is. Due to this, it’s highly important that you invest your time with a viatical settlements company that’s both reputable and has your best interest at heart.
A life settlement is a trade between the policyholder and the purchaser. This type of settlement is designed for those with longer life expectancies. Life settlements are designed for those with longer life expectancies. Life settlements are fantastic as they allow the policyholder to obtain cash for an unwanted or unaffordable life insurance policy. In turn, they get to enjoy financial relief and have the option to spend the funds however they choose to. The benefit to selling a life insurance policy in the event of retirement or old age is that the insured will obtain significantly more money than if they were to simply surrender the policy or allow it to lapse.
In a viatical settlement, the proceeds from selling one’s policy are usually far greater than in a life settlement. Another differentiating factor involves the taxation of the proceeds by IRS. In terms of the federal tax laws, usually a viatical settlement is income tax free, whereas life settlements may incur federal taxes (capital gains or ordinary income) depending on the cost basis of the premiums paid. Although many states have enacted tax laws similar to the IRS’ treatment of viatical and life settlements, the tax treatment on the proceeds varies from state to state.
There are several situations whereby a Viatical Settlement or a Life Settlement will make sense for you to pursue
TRUST LIFE SETTLEMENTS
TRUST LIFE SETTLEMENTS
TRUST LIFE SETTLEMENTS
Today, life settlements (also known as senior life settlements) are becoming more popular as aging baby boomers and older seniors learn about the existence of the secondary market for unwanted policies. Previous estimates by LISA indicate the settlement market to be approximately 95 percent life settlements and 5 percent viatical settlements.
The decline in the volume of viatical settlements started in the mid-1990s when protease inhibitors became available for AIDS patients and changed the prognosis for these patients. Based on the secondary market transactions processed by Trust Life Settlements over the past several years, viatical settlements make up a very slight percentage of the overall caseload.
While most secondary market transactions involve life settlements for seniors over the age of 65, it’s comforting to know that viatical settlements are an option for those who need it and who qualify. Call us to request a policy analysis for your viatical settlement Trust Life Settlements offers free policy analysis to determine if you qualify for a viatical settlement or a life settlement.
Contact a member of our team at 800-216-2513.
Trust Life Settlements is the expereinced team that will advise you
on the best course for you to take