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Michael Bradburn January 29, 2018

Tax Reform Fuels Senior Life Settlement Sector


As a business owner, you have a not-so-silent partner sitting in your boardroom. His name is Uncle Sam. He never signed a partnership agreement or anted up for his stake in your company, but he is your partner just the same. Until very recently, he was a 35% stakeholder in your business.

That’s not really a bad thing if you think about it. He does his part. How much would it cost to build your own roads, railways and bridges…employ a private security force or lay pipes for clean water on demand? What a country…We have the best of all things in America. Uncle Sam even gives you the option to be billed quarterly or annually for his services. Your call.

What’s even better, Uncle Sam just voluntarily offered you, the Business Owner, a pay cut. He only wants 21% now to keep doing the same hard work to make you more competitive. That’s the lowest it’s been since 1939.

The tax reform bill has many other benefits and two, in particular, that impact the Senior Life Settlement Industry.

In Capstone's Policy Supply and Investor Demand Blog, the health and wellness of the burgeoning life settlement industry is reported by industry sources to be on the rise. To fuel that fire, Revenue Ruling 2009-13 has been modified to the benefit of individuals and trusts that have a desire to sell an unneeded, unwanted or unaffordable life insurance policy.

Formerly, sellers were required to remove the cost of insurance (COI) from premiums paid to calculate the cost basis for a life settlement transaction. The change to the tax code allowing the full premium inclusion in the basis calculation has made settlement a more attractive option.

Secondly, The Act doubles the estate tax exemption to $11.2 million for singles and $22.4 million for couples. That helps the top 1 percent of the population who pay it accounting for $17 billion in taxes. The exemption sunsets to pre-Act levels in 2026. This is a chance to get while the get’in is good.

The effects remain to be seen but it is anticipated that the relief from estate taxation will increase life settlement supply. Because life insurance benefits are tax free, insuring estate tax liability is a preferred method of financial planners for preserving wealth for future intentions. Many, now over-insured, will be seeking to monetize their life insurance assets driving inventory levels up in the secondary market.

Investors seeking alternatives to diversify away from volatile markets and potential bubble territory corrections should understand the benefits of investing in Senior Life Settlements. As an asset class, life settlements are highly non-correlated to markets and offer absolute return characteristics.

While onerous taxation is at bay, make hay while the sun is shining. It’s bound to rain again someday. To learn more about Capstone Alternative Strategies and how we can be an engine for growth, contact Jason Bokina at 404-504-7006 or email