| A
Senior Life Settlement can become a valuable tool in financial
planning. It can provide cash for life insurance policies when
circumstances change and the risk originally covered by the
policy is no longer present.
The answers to
these common questions can help determine whether a Senior
Life Settlement is right for you or your client:
Q
–
What is a Senior Life Settlement?
A – A life settlement is the transfer
of ownership and beneficiary of an unwanted or unneeded life
insurance policy by a senior, over the age of sixty-five,
for a cash payment greater than the policy’s cash surrender
value. The policy owner transfers ownership rights to the
provider for payment. The purchaser then becomes the policy
owner, beneficiary, and is responsible for future premium
payments.
Q
–
What types of life insurance policies are eligible
for
Life Settlements?
A – Almost any life insurance policy
can be eligible for a Senior Life Settlement including Term,
Whole Life, Variable Life, Universal Life, Survivorship policies,
Adjustable Life, Joint First to Die and Group Life (if convertible).
Q
–
Who qualifies for a Senior Life Settlement?
A – Typically a candidate for a Life
Settlement is an individual over 65 with 2 to 15 years life
expectancy. Click here
to try our Qualifying Worksheet.
Q
–
When is a policy considered for a Life Settlement?
A – Generally, a policy has value in
the Life Settlements market if:
- The
insured is over the age of sixty-five
- Has
experienced a decline in health since issuance
- Has
a life expectancy of fifteen years or less
- The
face amount is at least $100,000, and the policy is beyond
the two-year contestable period
- Try
our Qualifying Worksheet
Q
– Why sell a life insurance policy?
A –
A life insurance policy can become a new source of wealth.
Click here for details
Q
–
Who buys
life insurance policies?
A – Policies can be sold to a secondary
market, just like the real estate market. The buyers are large
institutional funds and high net worth individuals.
Q
–
How does it work?
A – Typically the process goes as follows:
- The
policy owner or financial professional submits an evaluation
form with signed application.
- P&T
Financial obtains all necessary documentation (Attending
physician’s statements, policy illustrations, etc.).
- A
Senior Life Settlement offer is submitted for acceptance.
-
If accepted, the contract is sent for signatures.
- Change of ownership is completed and funds are released
to the previous owner
Q
–
What are the tax implications?
A – Tax obligations will vary but this
example can help demonstrate a typical situation.
A
Life Settlement of $250,000 received. The policy had a $70,000
surrender cash value and a cost basis of $50,000. The $180,000
difference between the Life Settlement and the cash surrender
value is taxed as a capital gain. The $20,000 difference
between the surrender value and the cost basis is taxed
as ordinary income.
P&T
Financial suggests you consult a tax professional when considering
a financial strategy such as a Life Settlement.
Q
–
Is it legal to sell a life insurance policy?
A – Yes. The sale of a life insurance
policy is regulated in most states and requires the involvement
of a broker. The broker is legally obligated to seek the highest
price for a policy.
Q
–
How do
I find out more or obtain information on behalf of
my client?
A – Contact P&T Financial for more
information. Click here for contact
information.
Back to Top of Page
|
