Life insurance has long been a planning tool to offset the impact of federal estate taxes or provide financial relief when a family needs it most. One of the most significant events that impacted recommendations by attorneys, CPAs, and advisors was the passing of the American Taxpayer Relief Act of 2012 (ATRA), which increased the estate tax exclusion to $5.25 million for individuals and, with portability, $10.5 million for married couples. This has created many discussions with clients and their advisors as the need for life insurance planning for estate tax purposes might need to be reevaluated.
Would your client deliberately abandon a piece of prime real estate they owned? Of course not. Yet, with a majority of seniors dropping their life insurance without checking for SMV®, secondary market value, $92 Billion of term policies available on insured 65 and older today could be vastly underutilized.
And the numbers keep growing. The total life settlement market potential is expected to grow from $114 billion in 2014 to more than $140 billion in 2018, according to Conning Research & Consulting 2012. The following case study is just one of many examples showing the vastly untapped potential of the secondary market:
Insured: Male, age 74
Type of Insurance: $1M Term – Convertible to UL
Listed as $0 on the balance sheet
Annual Premium: $35K
Projected Median Life Expectancy: 120 months
Secondary Market Value: $175K
The transaction process for determining a life insurance policy’s fair market value is very similar to a real estate transaction. Although there are some steps that need to be negotiated, the great news is that a health exam is not required to end a policy. get a secondary opinion® of the potential value of your client’s policy at www.ashargroup.com/quiz to determine if you should call a secondary market specialist to discuss digging deeper and gathering more information.
