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Life settlements add cash to estates and retirement accounts

Life insurance has been considered a must by successful financial planners for generations now. Many high-earning professionals in Connecticut have enjoyed the security of knowing that their family's standard of living is safe from an unexpected death or disability.

The conditions under which people hold on to policies until death have changed a lot since their inception. For example, better health over a longer lifespan is more common. Tax laws have also changed.

Many people facing cash shortages and income reductions over the years are considering life settlements. A life settlement is the sale of a life insurance policy before maturation.

Most life insurance policies are based on a life expectancy calculated by an actuary or insurance professional. New federal tax guidelines lower the penalties and other payments for people who choose a life settlement with two years or less until reaching their life expectancy. The government considers it an advance on a policy's payout.

One man who survived his wife considered no further need to maintain his $500,000 life insurance policy. He was going to let it lapse until his lawyer told him to work with a financial planner to sell the policy. That netted him $78,000 for his retirement. Some people who sold their policies before the tax law changes may also claim a tax refund.

People trying to make sense of estate planning or retirement planning may make good use of an attorney who is able to see all the possibilities for the future. A lawyer can help set reasonable goals and pursue them with wills, trusts and other estate planning documents.

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