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Life Settlements

Life Settlements. Anthony Ridd Director of Life Settlements LifeStyle Insurance Services 800-493-2056. What is a Life Insurance Settlement?. A cash payment to the owner of a life insurance policy in exchange for the assignment of ownership of the policy

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Life Settlements

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  1. Life Settlements Anthony Ridd Director of Life Settlements LifeStyle Insurance Services 800-493-2056

  2. What is a Life Insurance Settlement? • A cash payment to the owner of a life insurance policy in exchange for the assignment of ownership of the policy • Payment in excess of Cash Surrender Value

  3. Who Qualifies? • Insured must be at least 65 • Policy face value at least $100,000 • Life expectancy less than 15 years • Cash Surrender Value less than 40% of Face Value • Premiums less than 6% of Face Value

  4. What types of policies? • Universal Life • Convertible Term • Whole Life • Variable Life

  5. Why? • Insurance no longer needed • Estate tax change • Family issues • Premium too expensive • Suitability • Buy/Sell Agreement • Retirement and Key Man • For Long Term Care or other health needs • Replacement of an existing policy with a new policy

  6. Female age 79 Universal Life Face Amount: $7,000,000 Cash Value:$17,000 Offer: $1,200,000 Policy was owned by a trust Reason For Sale: Insured could no longer afford the annual premium of $250,000. She sold her policy and invested the settlement amount in a new $7,000,000 policy. Premiums for the new policy were reduced to $119,000. Agent compensation: $350,000 on settlement and sale of new policy LifeStyle Case # 1

  7. LifeStyle Case # 2 • Male age 73 • Convertible Term • Face Amount: $5,000,000 • Cash value: $0 • Offer: $547,157 Reason for Sale: The insured owned a convertible term policy and wanted to continue the same coverage in a permanent policy but those premiums were unaffordable. The insured sold his existing term policy, which had no cash value, for $547,157. He then purchased a new $5,000,000 permanent policy with the proceeds of the settlement. Agent made: $403,000 on settlement, conversion and new policy. His renewals will be on both the conversion & the new policy

  8. LifeStyle Case # 3 • Male age 82 • Universal Life • Face Amount: $1,000,000 • Cash Value: $112,000 • Offer: $257,000 Reason for Sale: The premium for the insured’s life insurance policy were expensive and becoming difficult to afford. In addition, the insured experienced a substantial reduction in estate value and no longer needed as much life insurance to pay estate taxes. He was able to sell his life insurance policy for twice the Cash Surrender Value. Agent compensation: $30,000 on settlement

  9. LifeStyle Case # 4 • Male age 65 • Convertible Term • Face Amount: $200,000 • Cash Value: $0 • Offer: $27,000 Reason for Sale: The insured owned a 10 year convertible term policy with three years of coverage left. At the end of the conversion period the insured decided to sell his policy for a lump sum. Agent Compensation: $6,000 on settlement

  10. Tax Chart (Seek tax advice from a professional) 10-year-old, $1,000,000 face amount policy $60,000 Cash Surrender Value $200,000 Settlement Offer Taxed as Capital Gains $140,000 Taxed as Ordinary Income $10,000 Cash Surrender Value (basis & earnings) Taxed Basis (Premiums Paid) $50,000

  11. What to look for… • A 1035 exchange of life insurance • Convertible Term policies • Key Man insurance policies • Replacement opportunities • Any policy the insured may be planning to lapse or surrender

  12. Why LifeStyle? • We use all of the major licensed institutional funding sources. • Our expertise, production levels and stature in the industry enables us to get the best offer for your client. • You can expect the same standards and quality of service that LifeStyle is known for.

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