Tax Considerations

Tax Considerations

The following is for informational purposes only:

Taxation of Life Settlement proceeds may vary state by state and the IRS typically treats each case differently. We recommend you consult your tax adviser and financial planner prior to selling any life insurance policy.

Below are a few basic concepts that must be understood prior to understanding the tax consequences of a settlement:

  • Cash Surrender Value (CSV) – The value of a policy surrendered to the insurance company. Quite simply, it represents the liquid assets inside the policy minus any outstanding policy loans.
  • Cost Basis – The total dollar amount paid into the life insurance policy including premiums and lump sum amounts.
  • Settlement Offer – The total amount of cash (before taxes) that a settlement company is willing to pay to assume ownership of a policy.