Life settlement proceeds may potentially be claimed by which of the following?

Life settlement proceeds can be claimed by creditors under certain circumstances. When an individual enters into a life settlement, they sell their life insurance policy to a third party for a lump sum payment that is typically less than the death benefit but more than the cash surrender value. This cash payment becomes an asset of the policyowner and can be subject to claims by creditors if the policyowner has outstanding debts.

In the case of bankruptcy or a legal judgment, creditors may have the right to access assets that were acquired prior to or during the legal proceedings. Therefore, the proceeds from a life settlement can potentially be captured by creditors to satisfy any debts owed by the policyowner.

The other entities mentioned, such as the policyowner's heirs, the government, and insurance regulators, generally do not have a legal claim to the life settlement proceeds. Heirs would only be involved if the policy was not sold and the insured passed away; the government would not claim these proceeds unless specific tax obligations are in question; and insurance regulators oversee the compliance of such transactions rather than making claims on them. This context clarifies why creditors are the correct choice in this scenario.