One of the biggest decisions an investor makes is whether to fund an investment in life settlements with non-qualified funds (cash) or qualified funds (IRA/Roth IRA/401k/etc.).
Investors who want to use cash must make sure that those funds won't soon be needed. Life settlements are an illiquid investment, meaning you can’t withdraw any funds until a policy matures. Usually, your money will be invested for several years. So, investors with cash need to only use funds they don’t foresee needing for some time.
Retirement accounts are often especially well suited to life settlements because most people don’t plan on accessing these accounts for several years, fitting this investment's anticipated timeline. And, life settlement payouts within a retirement account will see no immediate tax implications, so funds are able to continue to grow tax deferred.