The Life Insurance Settlement Association is about to meet in New York for the ninth annual Life Settlement Institutional Investor Conference. Here’s a look at the state of the life settlement market by an executive at Coventry, one of the major market players.
What if seniors already owned a valuable asset that they could use to generate income and pay for rising health care expenses?
If they own a life insurance policy, they might already qualify to sell that policy for cash in a transaction called a life settlement. And two recent developments are starting to change the tax landscape to make it more advantageous for policyowners
(Related: Life Settlement Investors Head to New York)
The Tax Cuts and Jobs Act of 2017 (TCJA) simplified the tax the consequences of selling a life insurance policy by reversing an IRS ruling that required the policy seller to reduce his or her basis in the policy by the cumulative cost of insurance charges, thus resulting in an increased taxable gain.
The TCJA clarified that life settlements should have the same, more favorable, basis as policies that are surrendered to a life insurance company.
In addition, a new proposed law would let seniors sell their life insurance policies tax-free if they deposit the proceeds into a trust account to pay for long-term care and other qualified health expenses.