Before the Secondary Market emerged, advisors and policy owners had few options when surrendering or lapsing a policy, which is why we came up with the idea of 5 best practices to protect your client and yourself. With more options and advantages available in the Secondary Market, advisors can offer their clients the potential for larger settlements and the possibilities to offset tax obligations. With these opportunities also comes the responsibility of advisors to know when the secondary market can be advantageous for a client, and this is where a Secondary Market Specialist comes in. These specialists are able to identify the potential for a policy to be sold on the secondary market, generating a settlement which can enrich the life of the policyholder and ensure the advisor did their due diligence for their client. Here are a few examples of how a Secondary Market Specialist can help traditional advisors and their clients:
- Offset estate tax obligations with life insurance – With the passing of the American Taxpayer Relief Act of 2012 (ATRA) estate tax exclusions were raised. This can cause a reduction in a client’s estate tax liability, which in turn can reduce the amount of policy coverage needed and frees up liquidity for other uses
- Convert a term policy into a cash settlement – The Term Transformer offers an alternative to liquidate a policy. It’s designed for a convertible Term Life Policy that is about to be surrendered or about to lapse
- Limiting liability for exit planning – Determining fair market value of a life insurance policy may be worth more than the business, generating significant value for a client for exit-planning or transferring business
- Eliminate premiums without surrendering policy – A Split Death Benefit Option from Ashar gives policyholders the opportunity to eliminate premium while maintaining some coverage with no future premium payments (a percentage of death benefit goes to policy owner while a buyer takes over premium payments.)
- Analyze likelihood of a policy flush in hidden value in the Secondary Market – Determining Fair Market Value (FMV) can significantly enhance the lifestyle of a client and minimize the risk of a lawsuit against advisor for negligence
If you are in a position where you think it would be prudent to consider alternatives, talk to a secondary advisor. You can also go to https://ashargroup.com/policy-value-questionnaire/ to take the first steps in determining if a policy may qualify for a life settlement. It only takes a minute, and it could help save your clients thousands.