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Tax Implications
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Tax Implications of a Life Settlement in Atlanta, Georgia
Tax for Financial Gains
You've been paying taxes all your life. Just like with any other income, the government takes taxes out of what you receive when you sell your life insurance policy. But maybe not…. Though we are not tax advisors, we have collected some general information about the financial implications of a life settlement.
Taxability
The amount that you can be taxed on your life settlement is based on three levels: cost basis, cash surrender value and capital gains. Where the cash return for your policy falls among these three levels determines the tax you'll pay on your return.
Not Taxable
Some funds from your life settlement are not taxable. The amount of the settlement that equals your cost basis is not taxable. Your cost basis is the aggregate amount of the premiums you have paid on the policy over the years.
Ordinary Income
The amount in excess of your cost basis up to the cash surrender value is taxed as ordinary income. The cash surrender value is the amount you would receive from your insurance company if you were to surrender your policy.
Capital Gain
After you pass the threshold for cash surrender value at the ordinary income tax level, you are taxed on capital gains. The amount of life settlement returns you receive that exceed the amount you would receive if you forfeited your policy is considered capital gain and is taxed accordingly.
Potentially Tax-free Event
Again, we are not tax advisors but, in our experience, if your life expectancy is less than two years and you deal with a licensed life settlement company, your settlement funds may be tax-free.
Speak with Your Financial Adviser
Speak with your legal and/or financial advisors for a thorough analysis before making any life settlement decision. Also, if someone from Habersham can speak to one of your advisors on your behalf – to help them understand this industry and the transactions – please let us know; we are happy to do so.
Habersham Funding, LLC
Building 11, Piedmont Center
3495 Piedmont Road NE, Suite 910
Atlanta, GA 30305
Phone: 404-233-8275
Toll Free: 888-874-2402
Fax: 404-949-2187
Habersham Funding is a life settlement provider that does business nationally; it can buy life settlement policies in all states and most US territories (including Washington, DC) except for Alaska, Florida, and West Virginia. This site is published for some, but not all the residents of the United States. This site is not intended for use outside of the United States.
