Liquidating distributions cash proceeds
Although life settlements can be a valuable source of liquidity, consider the following issues: Economic trouble can prompt you to contemplate liquidating assets for cash.
Sometimes you might have no other choice, but when it comes to life insurance, think about why you purchased the policy in the first place. Are the policy's beneficiaries depending on the death benefit if something happens to you?
Short of hitting the lottery, none of these options comes without mitigating issues, but based on your current needs and financial circumstances, some choices might be better than others.
Depending on the terms of the policy, the loan might be subject to interest at varying rates; however, you are not obligated to financially qualify for the loan.There are certainly drawbacks to using life insurance to meet immediate cash needs, especially if you're compromising your long-term goals or your family's financial future.Nevertheless, if other options are not available, life insurance—especially cash-value life insurance—can be a source of needed income.The amount available differs based on the type of policy you own and the company issuing it.The main advantage of cash-value withdrawals is they are not taxable up to your policy basis, as long as your policy is not classified as a modified endowment contract (MEC).
Generally, to qualify for a life settlement, you (the insured) must be at least 65 years old, have a life expectancy of 10 to 15 years or less, and a policy death benefit of at least $100,000 (in most cases).