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Meaning / Definition of

Life Settlement

Categories: Insurance,

If you are over age 70 and no longer need your life insurance policy, you may be able to sell it to a third party in what's called a life settlement. You're paid a cash amount less than the death benefit but typically greater than the surrender value, and the party that buys your policy will get the death benefit when you die. Similar to viatical settlements, in which terminally ill people may sell their life insurance policies, generally to use the cash to pay for healthcare, life settlements let you forgo a death benefit and use the cash in your policy while you're alive. However, life settlements are for people who are healthy and expect to live more than a couple of years. Specific rules for life settlements are set by the state where a specific transaction takes place.Some businesses specialize in buying life insurance policies from older or terminally ill individuals and reselling them as investments. However, because these insurance arrangements are controversial and most investors understand them poorly, both people considering selling policies and people considering investing in them are advised to proceed with caution. For example, there may be complex estate-planning and tax consequences to life settlements.

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Definition / Meaning of

US Savings Bond

Categories: Investing and Trading, Stocks,

The US government issues two types of savings bonds: Series EE and Series I. You buy electronic series ee bonds through a treasury direct account for face value and paper series EE for half their face value. You earn a fixed rate of interest for the 30-year term of these bonds, and they are guaranteed to double in value in 20 years. series ee bonds issued before May 2005 earn interest at variable rates set twice a year.series i bonds are sold at face value and earn a real rate of return that's guaranteed to exceed the rate of inflation during the term of the bond. Existing series hh bonds earn interest to maturity, but no new series hh bonds are being issued.The biggest difference between savings bonds and us treasury issues is that there's no secondary market for savings bonds since they cannot be traded among investors. You buy them in your own name or as a gift for someone else and redeem them by turning them back to the government, usually through a bank or other financial intermediary.The interest on US savings bonds is exempt from state and local taxes and is federally tax deferred until the bonds are cashed in. At that point, the interest may be tax exempt if you use the bond proceeds to pay qualified higher education expenses, provided that your adjusted gross income (AGI) falls in the range set by federal guidelines and you meet the other conditions to qualify.

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