Historically, uncertainty in financial markets increases life insurance lapse activity. Think about your parents and the large number of baby boomers who are retiring every day or already retired. What are they worried about?
According to the 2023 Transamerica Center for Retirement Studies Report, the most often cited retirement fears are declining health that requires long-term care (36%), Social Security will be reduced or cease to exist in the future (36%), outliving their savings and investments (35%), possible long-term care costs (30%), not being able to meet the financial needs of their family (30%), and cognitive decline, dementia, Alzheimer’s Disease (29%).
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Business was sold, and the policy was no longer needed
Business owner was able to receive additional value above and beyond the sale of the company.
Their needs had changed, and they no longer needed the policy
They were able to uncover significant liquidity and fund their retirement.
Donated policy to a charity ran out of cash value to pay premiums
Donor was able to create a living legacy and enjoy seeing the gift used while living.
In a recent conversation, an advisor shared the tension and anxiety related to adult children in their 30s to 50s having conversations with their parents about aging, future caregiving needs, and health changes. A key factor is financial independence or dependence on the family.
As retirement has changed over the past several decades, longevity has become a vital component of financial planning. With people living longer, continued inflation, and rising healthcare costs, outliving one’s retirement plan is a real concern.
This is why a frank discussion about health, longevity, and long-term care needs to be part of every retirement strategy session with your senior clients. Here are a few thoughts to get the conversation started with clients.
What type of information is discussed or gathered in ongoing planning discussions with clients? Many advisors use age 95 as a standard life expectancy for retirement planning because it’s a conservative estimate. When it comes to finances in one’s advanced years, being conservative is important. However, to develop the most sustainable financial plan, some advisors have opted to use a longevity calculator instead of the industry standard for every client. This will allow you to create a more personalized plan for every client.
Consider including the following question on planning checklists about physical and mental health, lifestyle, and their vision for what their life looks like in their late 80s to 90s.
"If there was a change to your health, where do you see yourself living? At home or in a community with others your age? Does this change if one spouse passes before the other?"
The good news can sometimes be the bad news. It's wonderful that people are living longer than anticipated, but often, their financial plan did not project them living into their late 80s to 90s. What if the planning is running low on cash flow? Retirement-age client’s health history and outlook are vital when it comes to effective retirement planning.
For example, a client who lives only to age 70 but spends the last five years of life in a long-term care facility could very well end up needing more money in retirement savings than a healthy person who ages in place and lives ten years longer.
Long-term care has become financially burdensome for most families, and those expenses continue to grow.
Since Medicare and Medicaid cover only a percentage of the care most people entering nursing facilities need, seniors - and their families - are left to make up the difference. With annual costs for a private room in a nursing home close to $110,000, that difference is often significant.
Having an open discussion of your client’s health history, family health history, and longevity expectations can help set realistic goals regarding how much they may need to cover long-term care.
"How are you planning to pay for those later years? The average cost can range between $5K- $10K per month for any higher quality option."
Over one-third of the country will be part of the longevity economy, which in turn could financially impact the remaining two-thirds of the country. How are families prepared to address the potential cash requirements for their aging parents and loved ones? This is also a good time to bring an alternative for paying for long-term care – life settlements. This solution allows clients to sell their life insurance policy for a lump sum of cash that’s greater than the policy’s cash surrender value.
On average, a life settlement transaction using a competitive auction platform through an independent life settlement broker can earn your client 5x the cash surrender value. This not only creates liquidity but also eliminates future premium obligations, allowing those funds to be used for other planning needs like retirement, investments, and long-term care.
"Do you foresee your adult children or someone else assisting in paying for long-term care? Have you explored all available options to fund these needs?"
Ashar Group is a nationally licensed life settlement firm representing the best interests of policy owners by creating a competitive policy auction to deliver the best value to the seller. Ashar Group does not sell life insurance, management assets, or purchase policies. We are an independent resource for fiduciary advisors and their clients specializing in life insurance valuation for planning purposes. Contact us today.
Enjoy more blogs in our Longevity Series:
Shooting for the Centenarian Club
The Keys to Longevity – It’s Never Too Late but Start Now!
Responding to online advertising and generic value calculators can mislead client expectations. Many things in life rarely come about; when this happens, the average person doesn’t have the knowledge to make a good decision. This can be true for financial professionals and consumers alike.
Understanding life settlements is one of those things. Where do advisors and consumers go to find the answers to questions about life settlements? If you Google life settlements, you will come up with 152,000,000 results. Even if you zoom past all the paid ads, you are still left with an abundance of contradictory opinions and information. Consumers are particularly vulnerable when they respond to direct-to-consumer TV commercials and social media ads about life settlements.
If you’re an advisor, who would you listen to, and how would you know if you can trust them to serve the best interests of your clients? Most of these ads come from life settlement lead generation companies and life settlement providers that represent the best interests of buyers wishing to purchase existing life insurance policies at a highly discounted price. It’s a good deal for the buyer but a bad deal for your clients. Furthermore, it’s almost impossible to use Google to determine whether you’re working with a licensed life settlement provider representing the buyer’s best interests or a licensed life settlement broker with a fiduciary duty to represent the best interests of the policy owner selling the policy.
This is precisely why attorneys, CPAs, CFPs, RIAs, and client-centric life insurance professionals do not rely on Google, social media, or television ads to determine who they should trust to help their clients. They use a more comprehensive due diligence process to protect themselves and their clients.
The strategy behind life settlement calculators
Most online life settlement platforms connect policyholders directly or indirectly with licensed providers that represent the best interests of buyers. They aim to lead your client to provide information by completing their life settlement calculator, then give them an arbitrary value and engage them in conversation. This is a problem for your client because the value indicated is, at its best, only a guess. The minimal output from a calculator is rarely accurate, and the potential offer is changed after additional medical, financial, and policy information is obtained. This misleads your client and forces them to lower their expectations. Often a highly discounted offer will be presented to your client based solely on the information provided on the calculator, and the deal can be closed quickly. Too quickly!
Moving too fast in life settlements can come with some inherent risk for you and your clients. If your client is involved in a life settlement process emphasizing speed, you might suggest they tap the brakes and determine if they are sitting on the wrong side of the negotiation table.
Bottom line: Complex transactions that require sophisticated underwriting and a negotiation process take time. There are only two licensed entities that sit at the negotiation table. Life Settlement Brokers represent your client’s best interests, and Life Settlement Providers represent the buyer’s best interests. Fast life settlements are risky. Slow down on the front end to verify that your client is represented by a nationally licensed life settlement brokerage firm experienced in case design and conducts a transparent policy auction between multiple providers to drive more value to your client. They will be glad you did!
Ashar Group is a nationally licensed life settlement firm that acts as a fiduciary to protect the best interests of policy owners by creating a competitive policy auction to deliver the best value to the seller. Ashar Group does not sell life insurance, management assets, or purchase policies. We are an independent resource for fiduciary advisors and their clients specializing in life insurance valuation for planning purposes. Contact us today.
Excerpt from an article in NAEPC Journal of Estate & Tax Planning by Jamie L. Mendelsohn, EVP
Life insurance can be the largest unmanaged asset a client owns, and it is rarely appraised or valued. Policy owners allocate significant liquidity on an ongoing basis, often long after transitioning out of the original need that the policy was put in place to protect. Even after a traditional policy review and exploring historical non-forfeiture options such as a surrender, reducing the death benefit, or 1035 exchange, the client is left feeling as if they are not in an optimal position. Creating awareness and educating policy owners that the life settlement market exists can result in many planning opportunities, as well as mitigating risk and liability for the advisory teams.
Many policy owners have paid into policies for decades and want more than the intrinsic value of ownership when considering exiting it. The opportunity to take advantage of a secondary market, to capitalize on the numerous institutional buyers competing in an auction to deliver more value than other exit strategies, is an important option to discuss with policy owners. Getting clients in the habit of valuing their life insurance, similar to how they appraise other assets, could create additional cash flow for other planning needs.
By: Bill Clark
Moving too fast in life settlements can come with some inherent risk for you and your clients. If your client is involved in a life settlement process that emphasizes speed, then you might suggest that they tap the brakes and determine if they are sitting on the wrong side of the negotiation table. No one likes to be hard closed.
I’m a big fan of the Fast and Furious movies and was saddened by the unexpected passing of Paul Walker in a fatal car accident in Los Angeles. On the home front, we all hold our breath as our teenagers start driving and hope and pray they never become the victim of a car crash. There’s a reason why car insurance companies charge more for inexperienced teenage drivers. Thankfully most of them reach adulthood unscathed.
Emphasizing Speed Over Outcome in Life Settlements is Risky Behavior
Most of our children do not end up flying fighter jets and exhibiting high-risk behavior like Tom Cruise in the Top Gun movies that had the famous line, “I feel the need for speed”. (By the way, Top Gun – Maverick which came out in June of 2022, is a must-see.) When a client is selling their life insurance policy, speed could mean there aren't competing buyers bidding on the policy. If your client fills out a life settlement questionnaire online and receives a quick offer, there could be cause for concern.
A direct buyer/provider offer may be fast, but it can leave some of your client’s money on the table, opening the door to liability for the advisor.
Successful life settlements that protect your client’s best interests require a degree of sophistication and information gathering that does not happen overnight. A fast offer is made with minimal underwriting information and is intended to quickly entice your client into settling for an amount that is less than what would be created by forcing competition among buyers. While the offer will be higher than the cash surrender value (CSV), it will be a far lower offer when compared to a fair market value (FMV) offer that is achieved through a life insurance policy auction between buyers. Those fast offers aren’t formal offers and can decrease once all the medical and policy information is reviewed. This could leave your client frustrated and confused. Some financial advisors even get caught up in these fast offers and unknowingly advise their clients to accept the offer without understanding how life settlements really work.
When Providers (Buyers) Compete, You and Your Client Win
There are two sides to any financial negotiation table: the buy-side and the sell-side. In the life settlement market, there are buy-side representatives (licensed providers) who may have one or more buyers they represent. Their goal is to get the best rate of return (lowest offer to your client) for the buyers they represent. They may tell you that they submit to multiple buyers, but they only use the buyers that they represent as a provider. This eliminates higher offers that could have been derived from forcing competition between multiple licensed providers.
A direct buyer/provider offer may be fast, but it is absent of competition and can leave some of your client’s money on the table. It also opens the door to liability for the advisor if stakeholders, such as beneficiaries, ask later if you shared the policy with multiple buyers/providers to create competition or if only one provider/buyer made the offer. A provider will gladly help your client sell their policy directly to the buyer, but they can’t serve two masters. They have a fiduciary duty to the buyer they represent, not your client.
The only way to receive an offer that provides fair market value to your client is through a competitive policy auction process that forces providers to compete.
Bottom line: Complex transactions that require sophisticated underwriting and a negotiation process, take time. There are only two licensed entities that sit at the negotiation table. Life Settlement Brokers represent your client’s best interests, Life Settlement Providers represent the buyer’s best interests. Fast life settlements are risky. Slow down on the front end to verify that your client is represented by a nationally licensed life settlement brokerage firm that is experienced in case design and conducts a transparent policy auction between multiple providers, to drive more value to your client. They will be glad you did!
Ashar Group is a licensed life settlement broker that acts as a fiduciary to protect the best interests of policy owners in the life settlement process by creating a competitive auction to deliver the best value to the seller. Ashar Group is an independent seller’s representative and does not sell life insurance, manage assets, or purchase policies.
Contact us today or try our no-obligation probability calculator.
Tax practitioners who are wary about discussing life settlements are not alone. Learn more about getting the best value in a life settlement transaction.
For a high number of seniors, the sad truth is that most will let their policies lapse instead of exploring a life settlement: which means no death benefit will ever be paid out. And according to the Insurance Studies Institute, 90% of these seniors would have considered a life settlement had they been aware of this option in the first place.
Yet many insurance agents are experience difficulty keeping up-to-date about the opportunities a life settlement may present. Some are even prohibited by their carrier or broker dealer to even have to discuss the subject of a life settlement with their clients in the first place. In situations where advisors have a fiduciary responsibility to their clients, this prohibition puts these planners in a position where they are literally handcuffed when it comes to meeting their fiduciary responsibility to their clients.
According to a life settlement study by the U.S. Government Accountability Office going back to 2010 and based on over 1,000 life settlement transactions, it found that seniors selling their policies in a life settlement transaction received almost 8 times as much money as the would have if they had surrendered their policy to the insurance company.
As a planner or fiduciary who has a client anticipating lapsing or surrendering a life insurance policy, it is to your advantage to get a secondary opinion® with The Ashar Group to see if you can do better with a life settlement. We are a team of highly skilled experts who work on behalf of financial advisors, trustees and other financial practitioners to find, negotiate and secure the true market valuation for life insurance policies in the secondary market.
Take a quick value policy quiz: https://ashargroup.com/quiz. It can help you determine if your policy can make more in the secondary market.
In a client-advisor relationship, the advisor is at an advantage, which is why it’s an advisor’s fiduciary responsibility to act in good faith for the client’s benefit. And this is more than the right thing to do; in many situations it’s the law. For example, according to The Employee Retirement Income Security Act of 1974 (ERISA): “A fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries “ (section 404 of ERISA)
With the advent of Life Settlements and the noticeably high hidden value they may contain, Consulting with a Secondary Market Specialist like The Ashar Group can provide a much needed source of revenue for a client, which is why no stone should be unturned to find the fair market price of a policy. If an executor fails to protect the estate’s assets the beneficiaries may have legal recourse to sue the advisor. And even if it even if legal action isn’t taken, the damage to a reputation could have serious consequences.
Life Settlements offer many options, and they are why advisors recommend to their senior clients who are looking for a way to enhance their retirement income to consider looking into the secondary market for a life settlement payout. For more information, talk to a Secondary Market Specialist at 800-384-8080 or visit ashargroup.com for more information.
Many changes can happen to seniors as they get older, which is why the ability to provide them with the services and support for those you love. Here are some links that you may find helpful as you deal with senior care and all the financial and emotional complexities that come with it. For a full list of recommended sites, please visit ashargrop.com.
AARP - American Association of Retired People:
The AARP website contains unlimited resources to help with retirement needs and healthcare planning. Research all the options available and hear from others on how today’s economy and events are impacting them. The AARP's retirement planning page: click here.
Society of Financial Services Professionals:
Society members can offer seniors and those who are providing their care expert assistance with: estate, retirement and financial planning; business and compensation planning as well as insurance for life, health, disability, and long-term care.
The Assisted Living Federation of America (ALFA)
The Assisted Living Federation of America (ALFA) is the largest national association exclusively dedicated to professionally-managed, resident-centered senior living communities and the seniors and families they serve. Their mission is to be a voice for choice, accessibility, independence, dignity, and quality of life for all seniors. For additional information, visit alfa.org.
The Alzheimer's Association
The Alzheimer's Association advances research to end Alzheimer's and dementia while enhancing care for those living with the disease. Learn more at allz.org.
The National Parkinson Foundation (NPF)
For over half a century, the National Parkinson Foundation (NPF) has focused on meeting the needs in the care and treatment of people with Parkinson’s disease (PD). NPF has funded more than $182 million in care, research and support services. Learn more about Parkinson's disease.www.parkinson.org.
If you are in a position where you think it would be prudent to consider additional alternatives like a Life Settlement, 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.
The possibilities of utilizing a SMV®, or Secondary Market Valuation, are many. If you are considering a Life Settlement, here are some important considerations:
• Make sure to work with a reputable Life Settlement Broker that will always have best interests of your client in mind. They will be will put your policy through a competitive bid process to ensure your client get the most for the policy.
• Consider the life settlement options. For example, Ashar offers a variety of alternatives when deciding on a life settlement: With the Lump Sum Settlement, the policy owner would sell the insurance policy that is no longer needed or affordable on the Secondary Market for more than cash value. With Term Transformer, a client can turn a term policy that is no longer effective for the policyholder or is about to expire into a cash settlement. And with Ashar's Split Death Benefit Option, the policyholder truly does have the best of both worlds. The policy owner retains a percentage of the death benefit while the buyer takes over the premium payments enabling the original policy owner to retain some coverage with no future premium payments on their part.
• Do it for the right reasons. Some reasons are better than others for choosing a life settlement. One easy way to determine if a life settlement is your best option is by going to www.ashargroup.com/quiz/start to see if you qualify. Besides reasons like funding long term care or reducing or elimination premiums, other compelling reasons include:
* Determining the value of a policy for a recent merger or acquisition
* A change or transfer in business when a policy can be valued as a significant asset
* Funding a project by generating liquidity
