Can you help me with this insurance question?

Question

My niece who has two boys, one of which will be in school for a long time yet, has recently been found to be disabled and is no longer able to work. Her company when she was hired gave her the opportunity to buy into an insurance policy that pays double indemnity so that each boy will get around 50,000 when she dies. She is in dire straits and needs that money now. She says she heard that there are companies that will pay you the money and then she would sign over her insurance to them as heirs or what ever you call that. Is there such a thing? If so who and where? Also how much would she have to pay in taxes for the money?

Right now it is made out to each boy but she can change the names on the policy whenever she wants to and her previous employer pays the premiums. This I know to be true.

It sounds kind of fishy to me, and I don't want her to get mixed up in something that will hurt her, I raised her since she was 16 and she is now 43.

Answer 1

I saw an add on TV about JG Wentworth.  They handle structured settlements.  No clue if they're any good or what other options there are, but that would be a start.  Where I'm from Insurance benefits are paid out tax free, so there shouldn't be any taxes.

Answer 2

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Answer 3

You really need to be asking that question to a professional insurance agent in your city. That is far too serious an issue to rely on random responses from people on this forum who don't know the laws of your state nor the complete circumstances of the issue. Make some phone calls to insurance agents in your city for proper advice. Good luck and all the best.

Answer 4

This is called a Viatical Settlement and can be a very risky venture. It is very complex legal and financial transaction and is not recommended to most people. All legal viatical settlement companies require that the person be terminally ill so your niece probably won't qualify. Also, the viatical company is required to pay the premiums.

As for taxes, generally the proceeds are tax free if you have a life expectancy of less than 2 years; if higher you're paying regular income tax. You may also have state income tax. If she is on any public assistance the money she received may alter her eligibility or may need to be forwarded to the state.

In most cases she wouldn't receive the face value of the policy.

This is just the basics, there are many other things to take into consideration. Since each state has different laws I'd suggest looking at your state insurance website for more info.