The life settlement market is back stronger than ever and now is a great time to dust off past submissions that didn’t work. Many of the cases closing today were first submitted in the 2004-2008 era. In most situations, its now 10 years later, and not only is the market stronger, but your client is older and may have developed some new health issues.
Give us a call at 800.384.8080 to discuss cases you previously sent to market that didn’t work. We will quickly be able to tell you if your case is a fit for the market today.
How many people are involved in planning the annual fund raising event for most charities? How many man-hours are devoted to just that one single event? There’s a much easier way for charities to raise capital for present needs.
One of the planners we work with asked us to appraise three one million dollar policies that were owned by a charity. The charity was going to surrender them for $50,000. These 3 policies that the charity was about to surrender for $50,000 appraised at more than $800,000! That’s more money than they had raised from their annual fund raising event.
It’s easy to do a quick check for potential present value in a policy owned by a charity. Simply go to https://ashargroup.com/policy-value-questionnaire/ to take the policy value quiz.
Many of your 50 and 60-year-old clients are part of the “Sandwich Generation”. They are striving to prepare for their own retirement and encumbered by the fact that they not only have financial obligations to their children, but many of them are now also faced with caring for a parent who can no longer live independently. You can help your clients caught in this scenario and determine if their elderly parent can qualify for a Long Term Care Life Settlement. That’s a mouthful, but in a nutshell, it means that if their parent is in need of immediate health care to assist in the activities of daily living, they may now qualify for a life settlement that would help pay for their health care expenses. On average, seniors who qualify for a Long Term Care Life Settlement, receive 40-45% of their policy’s face value.
This form of life settlement places the settlement proceeds into a FDIC insured irrevocable benefit trust that is professionally administered with the healthcare payments being made monthly on behalf of the of the individual receiving care. For example: A 77-year-old male was able to sell his $100,000 policy for $45,000. The proceeds were placed in an irrevocable trust and immediately began paying a monthly benefit of $4,500 for 9 months while retaining a funeral benefit of $4500. There are two benefits in this transaction. First, your clients in their 50’s and 60’s now get some relief from having to take funds out of their own investments to pay for mom’s health care. The second benefit is even greater. After months of feeling like a burden to her son, Mom now has the dignity of knowing that she is paying for her own healthcare. That very fact has improved Mom’s quality of life and that’s priceless.
We had one of the families share with us that, “Our mother said that this was the first time in over 10 years that she hasn’t felt like a burden to us.” As you can see, this goes well beyond a monetary gain. Although the adult children were happy to care for their loved one, they now could alleviate the financial strain and tension that this caused between the siblings.
Every year millions of seniors abandon a life insurance policy and get nothing in return for it. According to the Insurance Studies Institute, “90% of seniors who lapsed a life insurance policy would have considered a life settlement had they been aware of the possibility.” If your client is caring for an elderly parent, be sure to explore a life settlement to help pay those costs. This settlement can provide money for home health care, assisted living, nursing home, and hospice care. The gift of dignity when it is needed the most.
If you are wondering whether a policy you own or are entrusted to may be worth more on the secondary market, you can quickly take the first steps by going to https://ashargroup.com/policy-value-questionnaire/. This short quiz can help you in determining if a policy may qualify for a life settlement.
get a secondary opinion®
Life insurance policy owners receive information from the insurance carrier about various policy values such as accumulated value, cash surrender value, guaranteed values, non-guaranteed values, loan value, face amount, and so on. One value that they don’t get from their insurance carrier is fair market value (FMV). For the two most frequently settled life policies, term insurance and universal life insurance with little or no cash value, that FMV can be a life changer for your client. On average, policy owners who sell their polices on the secondary market receive 8 times more value than if they had simply surrendered the policy back to the insurance carrier for cash surrender value. (2010 Government Accountability Office, GAO)
Deal or no deal? An offer that represents fair market value is the only deal your client should accept. However, successfully completing a life settlement and obtaining FMV for your client can be a very elusive pursuit if you don’t follow life settlement best practices. It is essential to use an experienced, independent, and unbiased life settlement brokerage firm to design your case and drive value in the auction process. With other players in the life settlement market, such as a provider and/or a buyer, this all important auction process on behalf of your client does not take place. That’s because providers and buyers have a fiduciary duty to the fund they represent, not to your client! It would be a huge mistake for a planner or fiduciary to unknowingly use a provider which would shortchange the client and could potentially lead to a malpractice allegation when it’s discovered that the policy was not put out for competitive bids from multiple institutional buyers.
As a planner or fiduciary it pays to complete your due diligence to make sure you are using a broker that represents you and your client. Here’s what can happen if you don’t: We recently helped a planner who had negotiated a bid for his client of $67,000 from a “settlement firm” that he assumed was getting bids on his clients 1.5 million dollar life insurance policy. Unfortunately, that firm was only trying to get the best deal for their fund. Thankfully, this “Deal” was not consummated. That’s because the advisor attended an insurance conference while this “negotiation” was going on and learned about life settlement best practices and due diligence. Upon returning home he contacted our firm and we took over the case and were able redesign the case and create a competitive auction process that drove the offer up to $248,000 for the same policy that had been offered only $67,000 from a firm that was acting in the capacity of fiduciary to the fund. Without a broker involved, the client would have accepted the $67,000 deal only because it was much greater than the cash surrender value and he didn’t know any better. Use a broker to make sure the deal is a good deal representing fair market value.
For additional information on how to complete your due diligence, please refer to one of our previous articles “Life Settlements: Fiduciaries Demand Fair Market Value and Aren’t Fooled by “Fair Value".
If you think it would be prudent for your client to consider alternatives like the secondary market, talk to a secondary market specialist. 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.
get a secondary opinion®
Every year a staggering number of senior life policy owners lapse or surrender their unneeded or underperforming life insurance policies without first checking for fair market value. A 1911 Supreme Court Decision, Grigsby v. Russell viewed life insurance as private property whose owner has all of the rights and privileges possessed by other forms of property. The owner has the right to assign or sell the policy. Unfortunately, most senior policy owners are not aware of the benefits of the life settlement market. According to the Insurance Studies Institute, 90% of seniors who lapsed a life insurance policy would have considered a life settlement had they been aware of the possibility.
Think about it:
• Would anybody throw a lottery ticket in the garbage without first checking to see if it had any value?
No! They would check for value first.
• Would you sell your house to a stranger who knocked on your door and offered you more than you thought it was worth?
No! You would get your house appraised to find out if it was worth more.
• Would you abandon your life insurance policy without first checking for fair market value?
Unfortunately, for most people, the answer would be YES! And ………….
when there is a FIDUCIARY involved, then that would definitely be a No No!
Under the right circumstances, uncovering the fair market value of a life insurance policy can be a game changer and provide a significant amount of “found money”.
Who is your client listening to? No different than other markets, there are companies trying to disintermediate fiduciaries and planners. They are aggressively advertising direct to your clients about receiving cash for their life insurance policy. If they’re successful in their quest, then your clients could be left without representation, vulnerable, and not treated in good faith.
Here’s what they could expect to hear. They promise your client something called “fair value”. It’s a subtle play on words with huge implications that could mislead your unsuspecting client into thinking they will get a good result. By communicating directly with your client, this strategy can be very profitable for them, not necessarily the client. Consequences can be long-term such as compromising the client’s existing financial plan and even introducing new products and services that aren’t suitable. The client is misled because they really think that they are getting a “fair value” because they received more than the cash surrender value, and as a bonus, eliminated intermediary fees. What could be better? Truth be known, they could have left as much as 800% or more of additional value on the table because they were dealing with a source that has a fiduciary responsibility to the fund they represent, not the consumer. If you were selling your house, would you like one offer or multiple offers to drive up the amount to your family? The same is relevant to selling your life insurance policy.
An additional downside for the client is not being duly represented. If a client were involved in a real estate transaction, they would hire a real estate broker or real estate attorney. The same process is true for many other transactions. Why would this be different? It’s always important to have an advocate on your team that knows where the potential landmines are located and the value can be identified. That’s why an experienced and independent life settlement brokerage firm becomes involved. This process can be complex. It’s critical to have a partner that has stood the test of time and can navigate the settlement process, saving the client time and money.
How do you protect yourself and your clients from this potential misrepresentation and misalignment? Here are few key questions to ask:
1. Is the broker or provider purchasing this policy for their own portfolio?
2. Do they have a fiduciary duty to the purchaser or to the client?
If the answer to either one of these first to questions is yes, then your clients’ need you to step in and represent them. The offer they would receive without your intervention would be heavily in favor of the buyer and not in your clients’ best interest. Also make sure the buyer is telling you the truth by asking them to respond in writing with these direct questions:
a. Will they rep and warrant that they do not have any ownership interest in the purchase of the policy?
b. Will they rep and warrant that they have no stake in the firm buying the policy?
3. Are they using the term “fair value” or fair market value? If they tell you that they obtain fair market value, then MAKE THEM PROVE IT! Ask the following questions:
a. Are they seeking multiple bids from several different institutional buyers? If not, then your client may not get what they deserve and could potentially be leaving as much as 800% or more of additional value on the table.
b. Are they being transparent? Will they provide a list of regulated licensed buyers and detailed bids? If they can’t or won’t do this, then that’s a big red flag.
Fiduciaries and planners that follow life settlement best practices always use an independent full service life settlement broker to design the case and manage a competitive bidding process that results in their clients receiving fair market value. Then, and only then are the best interests of your clients being served.
If your client is in a position where you think it would be prudent to consider alternatives, talk to a secondary market specialist. 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.
Especially in a time where health costs are higher than ever, pensions are becoming a thing of the past and the financial stress still lingers in the investment accounts of Americans approaching their retirement years.
The Secondary Market has taken off over the last decade, generating billions to consumers through the surrender value of their policy. Right now, $92 Billion worth of Term policies are available on seniors aged 65 and older. These are policies that could be worth a large sum of money in the Secondary Market, and could make the difference between living with dignity and merely existing for many senior citizens.
To explore the benefits of the Secondary Market, seniors can get a SMV®, Secondary Market Valuation, on their policies through their advisors. With an SMV®, advisors have valuable information about the fair market value of a policy, information that can help clients who are facing fixed incomes or less aggressive investment decisions make informed decisions regarding financial challenges.
If you think your client is in a position where a SMV could provide a better outcome, talk to a secondary advisor at 800-384-8080. 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.
get a secondary opinion®
A new life settlement option has been developed to assist senior clients who have an immediate need of long term care. It applies to nursing home care, home skilled nursing care, assisted living, and hospice. This long term care (LTC) benefit program is an approved Medicaid spend down and allows the sale of a life insurance policy rather than forcing someone applying for Medicaid to surrender their life insurance. Funds from the sale of the policy are placed in an irrevocable trust to begin immediate payout for LTC monthly expenses. This program is gaining in popularity as Legislators see it as a good way to control Medicaid costs.
For adult children who are caring for their parents at home rather than putting them in a nursing home, this program can help keep them from having to dig into their own retirement or education funds in order to care for a parent. This is not long term care insurance because this program is only applicable for clients in need of LTC right now. It is a timely option for those that did not plan ahead by getting insurance but still need some financial assistance.
As needs for better standards of living arise for seniors who have outlived their retirement income, who are straining family budgets or who weren’t prepared for increased costs associated with long-term care, alternatives like the long term care benefit program, have been a valuable and life-saving solution for advisors — helping them support families with aging parents.
Talk to a Secondary Market Specialist at 800-384-8080 or visit ashargroup.com for more information on this emerging market.
Is Life Insurance Your Client’s Greatest Asset? A life insurance policy can have a monetary value on the Secondary Market that far outshines its cash surrender value. Using a SMV®, Secondary Market Valuation, can help you determine the actual fair market value of a policy for your client. And finding previously unknown monetary value not only will elevate your worth in your client’s eyes, it can minimize potential liability if a policy lapses or is surrendered for minimal value. Here’s a compelling example.
A 74-year-old male was retiring from his business and had a $1 million Term policy that was still convertible to Universal Life. In looking at his overall plan, the policy was listed at $0 on the balance sheet and the client didn’t realize the policy could have value in the secondary market. With an annual premium of $35K and a life expectancy of approximately 10 years, his was able to appraise and sell this policy for $175K in the Secondary Market. The found money was used to fund retirement and long term care needs.
With a little due diligence on an advisors part, a Life Settlement can become one of the biggest assets in their clients’ overall plan, not to mention a great way to enhance the relationship between advisor and client.
To take the first steps in determining if a policy may qualify for a life settlement, go to https://ashargroup.com/policy-value-questionnaire/. It only takes a minute, and it could help save your clients thousands.
People are living longer and pensions are becoming a thing of the past. The Life Settlement option has emerged as a viable option when it becomes clear to the adult-children or the senior that they are outliving their savings and in need of liquidity to maintain their lifestyle for years to come. Consider the facts: according to The Administration on Aging (AOA),people 65 years or older numbered 39.6 million in 2009. They represented 12.9% of the U.S. population, or about one in every eight Americans. By 2030, there will be about 72.1 million older persons,
more than twice their number in 2000.
It’s the perfect storm: more seniors than ever before are living longer and are worried about running out of money in their retirement years. That’s
why educated advisors are needed now more than ever to help seniors find additional sources of revenue to fund their retirement and health care needs. One of the most relevant and reliable sources of additional income for an aging population is the Secondary Market for Life Insurance.
A study from the Government Accountability Office concluded that a Life settlement offered seniors approximately 8 times more than the surrender value as opposed to just letting thelife insurance policy lapse. That’s additional income that can be used to fund long-term health care needs, retirement needs, or simply as a way to offset the costs of living on a fixed income while trying to keep pace with inflation.
So how do you know what a policy is worth? No different than other assets a person owns, policy owners can have it appraised or valued in the Secondary Market. While many seniors can benefit from a SMV®, Secondary Market Valuation, those who have health conditions that were developed after the policy was issued years ago, are the ones who benefit most. There are many reasons why advisors are telling their senior
clients who are looking for a way to enhance their retirement income to consider a life settlement payout. To see if your policy can qualify, talk to a Secondary Market Specialist at 800-384-8080 or visit ashargroup.com for more information.
