Often, the biggest hurdle in pursuing the sale of a life insurance policy revolves around the potential taxation of any proceeds from the transaction. To make a fair and accurate analysis of any life settlement options, policy owners and insureds must understand how the transaction can impact their bottom line. Furthermore, like most things related to the tax code, the answer is not always simple. So, Settlement Benefits Association now offers two free ways to help understand the taxation of life settlements:
The ultimate Life Settlement tax reference includes the the tax definitions of “terminally ill” and “chronically ill” in addition to examples of how a gain or loss is calculated.
Follow this simple flowchart to determine your taxation scenario.