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How Tax Reform Could Fuel Life Settlement Industry

Jun 13th 2018
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The recent tax reform efforts pushed through by the Trump Administration have shaken up the market quite a bit, and few industries stand to gain as much from the Tax Cuts and Jobs Act than the life settlement industry. If professionals in the life settlement industry leverage this newfound tax boon wisely, they could soon find their field soaring to the top of the market.

Here’s how the Tax Cuts and Jobs Acts adds some fuel to the engines driving growth in the life settlement industry, and why it may continue to do well for some time.

Stepping on the gas

Across the market, industries felt a regulatory burden suddenly lifted with the passage of the Tax Cuts and Jobs Act, but there may be more potential in the life settlement industry than anywhere else. The broader life settlement market itself is continuing to grow, and the recent tax overhaul made certain insurance policies less desirable to a great deal many of customers. As long as American taxpayers can continue to expect better rules when it comes to such things as the estate tax, you should expect them to increasingly shun their existing life insurance policies and turn to the life settlement industry.

Besides the fact that the recent tax reform led to more Americans having some extra cash in their pockets, it also generated a series of changes that will greatly appease those who are unsure about their existing policies. Whether customers are simply unpleased with their existing policy or think they should get a new one entirely, they’re more likely now than ever before to sell their policy to a third party, primarily thanks to how easier it is to pass things on to one’s heirs.

Rather than losing their policies, particularly rich senior citizens are more likely to look to the life settlement industry now that the exclusions offered by the new estate tax make it more profitable to do so. Private companies are likely to benefit from this tremendously; across the life settlement industry, we’re already seeing a surge of growth that could very well continue unabated for years to come.

Seniors aren’t the only ones benefiting from the recent tax overhaul, however; younger Americans who now have more money to spend and greater economic optimism are less likely to think they should stick to their existing policy scheme, too, and will likely find themselves pivoting over to the life settlement industry. While virtually all markets are booming currently, particularly with the DOW up so high and unemployment figures looking great, the life insurance market, together with the contract compliance audit industry in general, will almost assuredly be buoyed by broader market forces for some time.

Is a better tax situation enough?

While the investing environment surrounding the life insurance market is looking ideal, it’s not yet clear if a better tax situation alone is sufficient to encourage long term growth in the life settlement industry. If professionals in the industry don’t make it clear to everyday Americans unhappy with their life insurance programs that their services are available, the overall industry could flag. Thanks to the recent Tax Cuts and Jobs Act, however, more Americans will likely be looking to their existing investing plans with renewed vigor.

When financial professionals helping everyday Americans with their tax situations note that the recent tax overhaul doubled the gift and estate tax exemption, for instance, many people are likely to see the true value of gong to the life settlement industry while the getting’s still good. While many Americans once saw it as an absolute necessity to have their life insurance programs somehow roped into their estate tax plans, the reality of today’s market is that’s simply not true anymore.

Nonetheless, there aren’t unlimited reasons to be happy about the market; Americans aren’t investing nearly enough in their retirement, for instance, and a change of government in the new future could quickly see new tax legislation introduced. Given that certain lawmakers have already vowed to repeal certain aspects of the recent tax overhaul, it stands to reason that things could change very soon. In the current market, however, investors curious about the life settlement industry and Americans unhappy with their choice of insurance provider have plenty of reasons to look up.

While forthcoming elections could very well lead to sudden reverses in the recent tax reform efforts, it stands to reason that the new tax regime will exist for some time, and will buoy the life settlement industry for the foreseeable future. As long as industry-wide growth continues to occur and it becomes less important for Americans to hang on to their insurance policies as part of their estate tax plans, expect the life settlement industry to continue soaring upwards for the next few years.