Charitable Installment Bargain Sale

Life Settlement Tax Strategy - Charitable Installment Bargain Sale

Would you rather have a tax deduction or a tax bill with your life settlement? Charitable Installment Bargain Sales are becoming an increasingly popular way to manage the tax implications resulting from life settlement transactions. Charitable Installment Bargain Sales have been used for some time with highly appreciated assets such as real estate, stocks, bonds, businesses etc.. Although, Charitable Installment Bargain Sales are now beginning to be utilized for life insurance policies sold in life settlements. At its core, a Charitable Installment Bargain Sale allows a life insurance policy seller to receive a tax deduction at the time of a life settlement and then receive the life settlement proceeds as ongoing payments spread out over a span of predetermined years chosen by the seller. A Charitable Installment Bargain Sale is relatively straightforward but has two main facets to consider.

Charitable Bargain Sale – The Tax Deduction

The first part of a Charitable Installment Bargain Sale is the “bargain sale”. In essence, the bargain sale occurs when someone sells property (securities, life insurance policy, real estate, etc.) for less than its fair market value to a qualified charity. The difference between the fair market value and the actual sales price constitutes a charitable gift. That charitable gift can then be used as a tax deduction by the policy seller.

Life Settlement Proceeds – Receiving Installment Payments

The second part of a Charitable Installment Bargain Sale is the “Installment”. Installment bargain sales provide an alternative to an immediate lump sum payment for an asset. The sale price of an asset, such as a life insurance policy, is paid in installments over multiple years. The duration of the installment is specified by the policy seller, but must be determined prior to completion of the sale itself. Thus by receiving the sale proceeds over a multiple year span, the tax liability for life settlement income is spread out over time.

We Work with Charities & Leading Experts to Provide a Turn Key Process

Anyone considering a life settlement should evaluate their potential life settlement tax responsibilities before selling a life insurance policy. At Amrita Financial, we don’t assume what strategy is best for you. A number of charities and tax experts are tied into our system allowing policy sellers to see multiple turn key options for your consideration. Only by fully understanding your options, can a policy seller make the best choice.