In this guest post, Lingke Wang — co-founder of Ovid Life, a technology firm aiming to create a centralized transparent marketplace
for life settlements transactions — provides a «Financial Advisor's Guide To Life Settlements» with a detailed review of the life settlement industry, what a life settlement provider is and how life settlements operate, and the mechanics of how an investor evaluates a prospective life settlement contract purchase (which is important to understand for any policyowner who might be selling their life insurance policy!).
In this guest post, Lingke Wang — co-founder of Ovid Life, a technology firm aiming to create a centralized transparent marketplace
for life settlements transactions — provides a «Financial Advisor's Guide To Life Settlements» with a detailed review of the life settlement industry, what a life settlement provider is and how life settlements operate, and the mechanics of how an investor evaluates a prospective life settlement contract purchase (which is important to understand for any policyowner who might be selling their life insurance policy!).
Not exact matches
And this is in spite of the fact that «Wells Fargo is one of the largest sponsors of Lisa.org which is the
Life Insurance Settlement Association; an association that has been in business for 20 years helping seniors get the most out of their life settlement transactions.&ra
Life Insurance
Settlement Association; an association that has been in business for 20 years helping seniors get the most out of their life settlement transactio
Settlement Association; an association that has been in business
for 20 years helping seniors get the most out of their
life settlement transactions.&ra
life settlement transactio
settlement transactions.»
Commissions — depending on your state regulations and business agreements you may be entitled to certain referral fees or commissions
for completed
life settlement transactions;
This type of
transaction is known as a «
life settlement,» and investors could be subject to a tax if the death benefit exceeds what they paid
for the policy.
A similar
transaction, called a viatical
settlement, is only
for those with a terminal illness who expect to
live another 24 months or less.
The sale of a
life insurance policy to a third party —
for more than the policy's cash surrender value — is known as a
life settlement transaction.
In a
life settlement transaction, the policy's owner transfers ownership of the policy to the buyer in exchange
for an immediate cash payment and, in some instances, a reduced interest in the death benefit
for the policy's beneficiaries.
LISA was established in 1994 and has played a key role in developing legislation and regulations as the foundation
for an open, transparent and competitive market
for the
transaction of
life settlements.
For most
life settlements, there is no mysterious stranger on the other side of the
transaction — it's most likely a huge corporation, a large bank or a major hedge fund.
A
life settlement is a
transaction in which an existing
life insurance policy that is no longer needed or is in danger of lapsing is offered
for sale to institutional investors in the secondary market.
Ironically, the biggest caveat of engaging in a
life settlement is the reality that any
life settlement policy worth selling to an investor is worth even more in the long run
for the policyowner to just keep themselves, where the internal rate of return will be even more appealing (since the investor has both
transaction costs to acquire the policy, and does not enjoy the death benefit tax free as the original policyowner would).
Thus, again, policies with less cash value — and a policyowner who doesn't want to make ongoing premium payments — tend to be the better candidates
for creating value in a
life settlement transaction.
Should this be the right decision
for you, however, the funds that are received from a
life settlement transaction can make a big difference in the way that many seniors plan
for retirement or other financial needs.
In some cases, the accrued loan interest on a
life insurance policy is so severe that there's no way to save the situation — necessitating either a surrender of the policy, or perhaps a
life settlement sale
transaction for an older insured.
A
life settlement transaction will be most favorable
for an insured who has had a significant adverse change in health, such that the policy is likely to pay out as a death benefit sooner rather than later (and thus why the buyer will pay more); the caveat, however, is that in such situations, it's especially appealing to keep the policy
for that very reason (as if it's good
for the investor, it's good
for the original policyowner, too!).
For insurance policies on those who are at least in their 60s (or older), another alternative to consider is a
life settlement transaction.
From a tax perspective, the significance of
life settlements transactions is that they trigger the «transfer
for value» rules, that cause the death benefit to be taxable to the new owner (rather than the usual tax - free treatment
for life insurance death benefits under IRC Section 101).