The Internal Revenue Service has taken particular interest in the life settlement market over the past several years. Non-investors, who want to avoid the withholding tax issue, look to offshore life settlement funds as a strategy of avoiding the tax. There is sufficient debate as to whether a fund’s offshore location is adequate for investors’ protection from the I.R.S. reach, especially since the assets and the insurance companies are U.S.-based.
There are withholding tax solutions for life settlement portfolios that take advantage of double-tax treaties between nations and the United States. This solution ensures that no tax will be levied against death benefit proceeds by the I.R.S. and the fund will not be taxed in the residing nation’s territory. This unique tax solution has been sign-off by U.S. tax attorneys and foreign regulators. It is a one of the kind tax structure for life settlements.