The Tax Cuts and Jobs Act of 2017 added reporting rules for certain transfers of life insurance policies. They were aimed at life settlements, but they can reach further. Advisors handling ownership changes should know when a transfer may be a reportable policy sale and who must file what.
Key takeaways
- A reportable policy sale is generally the acquisition of a policy by someone with no substantial family, business or financial relationship with the insured apart from the policy itself.
- The acquirer, the carrier and, at death, the payer each have reporting duties on Form 1099-LS, 1099-SB or 1099-R.
- The rules can reach business and some family transfers, not just life settlements, so every ownership change deserves a review.
The reporting rules were aimed at life settlements, but they are broad enough to touch everyday business and family ownership changes.
Why the rules exist
Many policy transfers for value make part of the death benefit taxable under the transfer-for-value rule. Historically, the IRS had little visibility into those transfers, so taxable death benefits often went unreported. The 2017 tax law responded by creating reporting requirements for reportable policy sales.
What counts as a reportable policy sale
A reportable policy sale is generally the direct or indirect acquisition of an interest in a life insurance policy when the acquirer has no substantial family, business or financial relationship with the insured apart from the acquirer’s interest in the policy. Traditional life settlements clearly qualify, but some business transactions and ownership changes may also need to be analyzed under the regulations.
Who files what
- The acquirer files Form 1099-LS with the IRS and provides copies to the seller and the issuing carrier.
- The carrier files Form 1099-SB with the IRS and the seller, reporting the seller’s investment in the contract and surrender value.
- At the insured’s death, the payer reports the death benefit on Form 1099-R.
Failing to file can create penalties, back taxes and professional fees that are easy to avoid by addressing the question up front.
Protecting your clients
Before any ownership change, confirm with the client’s tax advisor whether the transfer could be a reportable policy sale or a transfer for value. Contact us if you need help thinking through an ownership change. Our team can gather the policy information advisors need and help you keep the case in good order.
Frequently asked questions
What is a reportable policy sale?
It is generally the acquisition of an interest in a life insurance policy by someone who has no substantial family, business or financial relationship with the insured apart from the policy interest itself.
What IRS forms are required for a reportable policy sale?
The acquirer files Form 1099-LS, the issuing carrier files Form 1099-SB, and reportable death benefits paid later are reported on Form 1099-R.
Do the reporting rules apply only to life settlements?
No. They were aimed at life settlements, but the definition is broad enough that some business and family transfers may need to be evaluated as well.
Reviewed by Tim Fuller on 2026-09-26
Tim Fuller
President, SRS Inc.
Tim leads SRS Inc., a full-service IMO (Independent Marketing Organization) and BGA (Brokerage General Agency), connecting independent financial professionals with life, annuity, disability income, and long-term care solutions from 60+ carrier partners.
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