The Tax Cuts and Jobs Act has had a notable impact on life settlements. The increase in the estate tax exemption to $11.2 million for individuals and $22.4 million for couples in 2018 necessitates a comprehensive review of insurance policies purchased for estate planning purposes. When reevaluating outdated estate plans, clients and planners may find that many of these polices, including second-to-die contracts, are no longer required. If this is the case, these policies may need to be surrendered. Prior to a client surrendering their policy though, prudent planners should be aware of their responsibility to investigate the alternative possibility of a life settlement instead. In some cases, a life settlement can offer more value for a client as opposed to surrendering the policy to the issuing insurance company.
See Robin S. Weinberger & Peter N. Katz, How the New TCJA Tax Law Affects Life Settlements, ThinkAdvisor, February 2, 2018.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.
