There may be viatical settlement tax implications for the sale of your life insurance policy. Viatical settlement tax laws vary from State to State as settlements are regulated on the State level. It is advised that you consult an experienced agent/broker or financial advisor familiar with viatical settlement tax laws in your State.
It is important to be aware of viatical settlement tax implications when considering offers for your viatical settlement. You will want to accept an offer that makes the sale worth the cost of the taxes. Most State law uses an equation to determine viatical settlement tax amounts. It usually includes the amount of the settlement minus any cash paid into the policy as well as the cash surrender value offered by the insurance company. The remaining amount is considered capital gains and it is the capital gains that are taxed.
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