Since the concept of a Life Settlement is still foreign to so many, it can be tough for people to grasp certain key concepts that need to be understood before one is able to make a decision. Some common questions are:
- How do I decide if a Life Settlement is best for me in my current situation?
- How exactly would I benefit financially from choosing a Life Settlement?
- When is the right time to consider one?
After talking and working with thousands of people, our ALIR Settlements team has identified four common situations that people find themselves in that cause them to second guess whether a Life Settlement really is the best option for them. The good news is, there are solutions for each one. If you identify with any of these, rest assured that it doesn’t mean you can’t take advantage of this incredible resource. We’ve outlined some general information, but if you need something a bit more personalized, please don’t hesitate to reach out to us.
4 Reasons You May Be Afraid to Consider a Life Settlement
1. You Have Sizeable Debt
The problem: We get it. Not all people are saddled with debt because they’ve made poor or ill-advised financial decisions in life. Things happen: unexpected medical expenses, sudden loss of employment, and unforeseen emergencies are all legitimate and sometimes unavoidable reasons that people find themselves with massive amounts of debt. In this situation, a Life Settlement may seem like a very attractive option to someone looking for relief, but it really depends on the timing. If things have gotten to the point where debt collectors have gotten involved prior to the acquisition of a Life Settlement, creditors may be coming for it. A lot of it.
The solution: In the case of sizeable debt, if a Life Settlement is on the table as a potential aid in eliminating it, opting to sell your life insurance policy before the situation spirals out of control and debt collectors enter the equation would be the best solution. If that is not possible, it would be best to get as much of that debt settled before entering the Life Settlement process.
2. Your Beneficiaries Still Need the Payout
The problem: Life Settlements can be a great option for people whose beneficiaries would no longer be in much need for the life insurance payout. But if you still have young children or grandchildren, or a spouse that may struggle financially in the event of your untimely death, then your life insurance policy is still serving a noble purpose. Selling it would eliminate any possible financial benefit that would be realized by your beneficiaries.
The solution: Just like you probably sat down and calculated what the needs of your beneficiaries were at the time you purchased your life insurance policy or last made adjustments, it is a good practice to periodically reevaluate your plan. You may find that you are in a position where your beneficiaries would not require the full amount of the death benefit anymore. Maybe they’d only really need a portion of it, and they’d actually be very supportive of you opting for a Life Settlement to ease any financial burdens weighing on you while you are still living. A viable option at that point would be to share the money that you receive from selling your policy with anyone who was slated to receive a portion of the payout.
3. You Didn’t Realize the Life Settlement May be Taxed.
The problem: Taxes always seem to throw a wrench in everyone’s plans. In the case of a Life Settlement, the proceeds may be taxed. If you’re counting on receiving a certain amount, but neglect to factor in the tax that will be deducted, you may be in for an unwelcome surprise.
The solution: We’re not going to get into all of the tax lingo here because we’d actually like you to stay awake long enough to read the rest of this article. Just know that if you’re considering a Life Settlement as an option, please think of us as a resource that is here to help you figure out specifics like this. We will explain everything thoroughly, clearly and equip you with the information you need to make an educated decision.
4. You’re Counting on Medicaid
The problem: Medicaid has long been a valuable resource for seniors over the decades. And if you are one of the 4.6 million low-income seniors who need healthcare coverage from Medicaid, it’s important to note that receiving a large sum of cash can cause someone to be disqualified from receiving it. This is because Medicaid has an asset limit, which varies by the state in which one lives. The cash from selling a life insurance policy could put a Medicaid applicant over that asset limit.
The solution: This is another area where we don’t want to overload you with all of the technical stuff at once. But on a very basic level, some of the asset gained from the Life Settlement would have to be spent on non-countable assets that are exempt from contributing towards the asset limit in order to minimize the possibility of being disqualified for Medicaid. If this is a concern of yours, don’t worry! Our team of experts would be more than happy to cover this subject in depth with you.
The unknown can always be a little bit scary. And as stated at the outside of this article, Life Settlements fall into that “unknown” category for the vast majority of people. So, if you need more information, please don’t hesitate to reach out to us. Our team at ALIR Settlements will always be here to give you the answers that will help you decide if a Life Settlement is the best option for you and your family. Our goal is to arm you with the accurate knowledge that you need to conquer any fears that you may have, and make a decision that allows you to move forward with confidence.