Life Settlements

Thinking Outside the Box

A new year means new goals and new planning opportunities, including any adjustments that need to be made to an insurance portfolio inside of an estate plan or business plan. Once the client’s time horizon has been considered and the policy review has been completed, options should be reviewed to implement a modified plan that fits the current needs of the client. If a client has an abbreviated lifespan and needs to adjust their short-term planning, we recommend considering a life settlement as an exit strategy for policies that are no longer needed.

A life settlement is a strategy that allows a third-party investor to purchase a life insurance policy from the policy owner for an amount that is higher than the surrender cash value but lower than the death benefit.  The third-party investor will keep the policy inforce and receive the death benefit upon the mortality of the insured.  For a life insurance policy to appeal to a third-party investor, they need to be able to create a plan to invest as little premium as possible for as few years as possible before receiving the death benefit.  For these reasons, older insureds (age 70+) who have policies with high cash values are obviously attractive to the life settlement market.

However, there are some sweet spots that appeal to the life settlement market that are much less obvious.  Some examples of these niche solutions are outlined in the graphic below.  We recommend exploring a life settlement as an exit strategy when considering the fate of a life insurance policy that is no longer needed or is no longer affordable due to extenuating circumstances.

Since we spend much of our time working with advisors, many of our new client relationships come directly from attorneys, accountants, and wealth managers. We have gained the trust of these advisors, and in turn have earned the privilege to be of service to their clients.  Contact us with any questions or opportunities to help you or your clients achieve identified goals.  This is what we enjoy doing for only a select number of families, businesses, and charitable institutions each year, and we look forward to hearing from you.