iYou’ve just helped your client complete a life settlement. Congratulations! You’ve saved them years of expensive premium payments, increased their financial security, and given them a financial cushion in case they need long-term care.
Now that your client has received their lump sum payment, the question becomes - now what?
While some clients may know exactly how they want to use the funds received from a life settlement, others will need some guidance. First, all clients should have a discussion with their tax advisor about the tax implications of the transaction.n
Depending on your client’s circumstances, however, there may be other things that they need guidance with after a life settlement.
Providing for long-term care
If your client is currently in long-term care, he or she might have already decided that the lump sum would be used to pay the facility. That’s why some policy owners complete life settlements in the first place - to fund their long-term care needs.
If your client is not in long-term care currently, however, you might still want to discuss the possibility of using the funds to pay for any future care needs.
Long-term care costs are growing rapidly, and many families are struggling under the financial weight. Placing a lump sum into an account that’s reserved for paying for long-term care or medical care can give your client - and their family - peace of mind.
Managing estate changes
If your client is planning to include the proceeds from the life settlement in their estate as an inheritance, they may need to consider whether, and how, the addition will change the probate process for their heirs.
If the life settlement sum will affect the estate significantly, your client may want to use other methods of transferring, such as gifting, or a transfer on death (TOD) account, to pass these funds to their heirs.
The need and the options will vary depending on the state in which they live.
Planning for later retirement needs
Many, if not most, Americans underestimate how much they’ll need for retirement, largely because they don’t take into account the growing cost of healthcare, as well as the increase of longevity.
A life settlement can give you a great opportunity to re-open the retirement conversation with your client.
Clients who want to use life settlement funds to increase their retirement savings may need guidance as to what kinds of accounts to use for the money, how to invest it, and how much and how often to withdraw. This discussion can open up many options and enhance the advisor-client relationship.
Once a life settlement is completed, the conversation isn’t necessarily over. Many clients will need additional assistance as they decide when and how to use the lump sum payment. For more on helping your clients during the life settlement process, read our post “Building Strong Relationships with Senior Clients - And Their Families.”