An air settlement occurs when a policyholder fatally or chronically sells his life insurance policy to a third party. The agreed price is usually higher than the cash redemption value, but less than the death benefit. Are Viatical settlements taxable?
How to submit a Viatical in the tax season
Although settlement funds are tax-free, it is important to ensure that the tax service person has knowledge of aviation medicine and how to properly submit it. When working with your CPA or financial advisor, make sure you have received a copy of the final documents you have completed to provide them for the tax season. Then they should be able to file their accounts properly so that your funds are tax free. For more information, you can also visit the Internal Revenue Service website to learn more about how they classify funds as tax-free for viatical settlements.
Taxation of wind settlements
Viatical settlement is defined as the sale of a life insurance policy from the insured whose life expectancy is 24 months or less to a viatical settlement society. During the verification process, the company you work with will order a life expectancy report from the insurance company. The individual life expectancy report is one of the main factors determining the policy offer, which is why it is an important part of the process. As long as you have this report or if your doctor signs up stating life expectancy is 24 months or less, the sale of the policy is treated as an air settlement and is tax free.
Myths and misunderstandings with the Viatical Settlement
As the settlement industry and volcanic settlement developed, the Internet was flooded with information (and misinformation) about life settlements. Unfortunately, separating fact from fiction is not always easy.
The amount of conflicting information may be a bit frightening for policyholders who want to enter the market.
To help clear up any misunderstandings about the air settlement and to resolve any myths, here are some of the most common problems we see when it comes to air settlements.
Myth # 1: Wind settlements are a scam
The thought that all aerial settlements are a scam is perhaps the most frustrating misunderstanding because it means that some people may have been abused.
The truth is that air settlements are a legitimate way of earning a life insurance contract for people with low life expectancy.
Myth # 2: Air settlements are always tax free
As discussed above, air billing must meet certain requirements in order to be tax-free. The first question you should ask when working with a settlement company is whether they are licensed by the state where you live.
Myth # 3: Wind estates are for the rich
For some reason, many people think that air settlements are only for rich people with expensive financial advisers.
Myth # 4: Air settlements are risk free
Although we are firmly convinced that aerial and life settlements are solid financial tools, they are not suitable for everyone.