Tag: Advisors

Accelerated Death Benefit Versus Viatical Settlement: Which Is Best For You?

accelerated death benefitHearing the news that a loved one is facing a terminal diagnosis is stressful for everyone in the family, and unfortunately financial concerns can also come into play along with the prospect of impending loss. What are the options for a terminally ill senior facing mounting medical or care expenses? Can a life insurance policy be leveraged to help meet that need?

There are two different options allow a policyholder to get cash out of a life insurance policy that might not be needed anymore. Both viatical settlements and accelerated death benefits could offer financial relief to families facing a difficult diagnosis, but the two agreements are different in several key ways.

Accelerated Death Benefit

An accelerated death benefit (ADB) is a provision attached to some life insurance policies that allows consumers to borrow against the value of the death benefit in the event of a terminal illness. The ADB, which comes in the form of a cash advance, is generally tax-free if the expected life expectancy of the policyholder is two years or less.

Generally an ADB is laid out as one of the features of a policy when it is originally issued, but according to some experts most insurance companies will consider providing the benefit if the policyholder meets the requirements, even if it wasn’t originally part of the policy. According to a January 2018 article on Investopedia, individuals may be eligible for an ADB if they meet one of the following criteria:

  • Diagnosis of a terminal illness with life expectancy of two years or less
  • Diagnosis of any serious illness that will reduce expected life span
  • Need for an organ transplant because of serious illness
  • Enrollment in hospice care

In most cases, a policyholder who accelerates his or her death benefit to help defray expenses only borrows against part of the policy, leaving a reduced death benefit that is still available for the original beneficiary. For example, if an individual with a $1 million life insurance policy needs funds for health care, he could borrow against half of that policy, receiving an offer of $265,000 cash against $500,000 of life insurance. That would leave $500,000 to go to his beneficiary upon his death.

Viatical Settlement

 A viatical settlement is a type of life settlement, but generally viatical settlements are reserved for those who have been diagnosed with a chronic or terminal illness. A terminally ill person is defined, for tax purposes, as one whose physical condition will be reasonably expected to end in death within twenty-four months of certification. A chronically ill individual is one who has been certified by a healthcare professional with either a substantial physical or cognitive impairment.

In a viatical settlement, a life insurance policy is sold to a third party for a lump sum, and the buyer assumes the premiums and receives the death benefit when the seller dies. The proceeds from a viatical settlement are generally exempt from federal taxation, because the Internal Revenue Service considers the payout to terminally ill individuals to be taxed in the same way as a benefit upon the death of the insured. In the case of someone who is chronically ill, the settlement proceeds can be tax exempt if the funds are used to cover certain health care expenses.

How to Determine Which is Best?

If a terminal illness has caused a financial strain, a life insurance policy can become an asset while the policyholder is still alive, but the individual will need to research the details of his or her policy to determine which type of transaction is better and more profitable for the situation. Sorting out the best path to help provide financial help to a family suffering a health crisis can be stressful, and a trusted advisor could help make sense of the situation and lay out the potential advantages of either path.

The first step, for any individual or their advisor considering the two options, is to determine whether the original policy included an ADB and whether the provider is willing to negotiate one if it isn’t laid out in the original terms. On the other hand, a viatical settlement usually requires documentation of a terminal diagnosis, so if such evidence is not available an accelerated death benefit might be the right choice.

The experts at Magna Life Settlements stand ready to advise anyone who thinks they might be eligible for a viatical settlement and answer any questions about the process involved in the sale. Set up a call with Magna today to ensure the best possible advice for your family through the illness of your loved one.

*Comments provided in this post are for informational purposes only and should not be construed as financial, legal or tax advice, recommendations or solicitations. Please consult your financial, legal or tax professional with questions related to the information presented, or for advice as to whether a life settlement is right for you.

What is a Life Settlement? [2019 Guide]

In many circumstances, a life insurance policy is an important investment that can benefit those left behind when a loved one dies. Many financial advocates would recommend life insurance to a client, but those same advisors understand that the efficacy of life insurance often runs its course. What alternatives exist for older policy holders who are still paying premiums despite the fact that their needs have changed and they don’t really need the policy anymore? It is possible that those individuals can sell their life insurance policy for cash value through a life settlement, in which a third party buys an unwanted insurance policy in exchange for cash. Here are some facts about the life settlement option:

The History Behind The Life Settlement Industry

The origin of life settlements dates all the way back to a 1911 Supreme Court case called Grigsby v. Russell. In the 1980s sellling an unneeded life insurance policy for cash became a way for people with diminished health to obtain funds for medical and living expenses. In the years since, legislation and tax laws have created a more favorable climate for consumers looking for options when an insurance policy is no longer needed. Statutes passed in the last five years now mean that 90 percent of Americans are protected by comprehensive life settlement legislation.

What Are The Benefits Of Selling My Life Insurance Policy?

The retirement years are costlier than ever, both because of the rising price of health care and the uncertainty of government resources like social security. A life insurance policy is an asset that can outlive its usefulness; the original beneficiary might not need the proceeds anymore, or the premiums have become burdensome. Under these circumstances, it is worthwhile for a senior to explore an option that can free up cash in the sale of that unwanted policy. Besides the obvious cash windfall, a life settlement also eliminates the premium payments that have depleted even more of a retiree’s limited resources.

Do I Qualify?

Two key variables dictate whether an individual would benefit from a life settlement: the policy holder’s level of health impairment and the cost structure of the policy. The two factors are related, where a policy issued with a higher rating combined with a poor health prognosis can result in a promising settlement offer. For example, if a universal life policy was issued at preferred-plus and the policy holder becomes significantly more impaired than predicted, a life settlement would provide a payout higher than the stated cash surrender value. Some policies are not a good fit for a settlement, and the owner may be better off to either surrender their life insurance policy for cash value, borrow against the policy’s value, or negotiate another option with their carrier. To find out whether a life settlement might be a good fit for you, visit Magna Life Settlement’s simple calculator.

What Are The Steps To Sell My Life Insurance Policy?

Because a life settlement can provide a significant cash payout to help pay for retirement expenses, no one should miss that opportunity simply because they don’t understand the life settlement process. As the word gets out about the potential upside of life settlements, seniors who are likely to benefit from these transactions need guidance about how it works and how to start the process. Here are the basic steps of a life settlement:

1. Determine your eligibility. Using Magna’s calculator, first determine whether your medical status and the specifics of your policy make you a good fit for a settlement.

2. Submit an in-force illustration. With the help of a Magna case administrator, you will request an illustration from your life insurance carrier that spells out what the minimum premium costs would be if you kept the policy until it matures – typically at age 100 – and if the net policy account value at maturity was $1,000. This allows us at Magna to determine how much your policy may be worth.

3. Submit additional healthcare data. At this point, you will fill out a HIPAA form protecting your privacy and submit your health data. This also helps us to determine how much your policy may be worth.

5. Wait for Magna review and informal offer. Then, your Magna representative will calculate the value of your policy and decide whether or not to make you an informal offer, pending the next steps of information gathering.

6. Magna obtains medical records and life expectancy report. These reports verify your policy value so that Magna can calculate an offer that pays out the maximum amount for your policy.

7. If your policy qualifies, Magna extends a formal offer. If you accept the offer, you will receive cash in exchange for the sale of your policy after the sale is complete. This closing process takes some time. Similar to buying a house, a life settlement involves signing contracts.

8. Magna takes over the policy. After the settlement transaction closes, Magna is responsible for paying all future premiums and receives the death benefit once the policy matures.

If you are interested in receiving a personalized life settlement estimate or have questions about the process, contact a Magna representative today.

*Comments provided in this post are for informational purposes only and should not be construed as financial, legal or tax advice, recommendations or solicitations. Please consult your financial, legal or tax professional with questions related to the information presented, or for advice as to whether a life settlement is right for you.

Sell a Life Insurance Policy For Cash?

sell life insurance policy for cash

With the promise of the insurer passing over a pre-determined amount of cash to your beneficiaries upon your demise, you are expected to pay monthly or quarterly premiums to the insurer. But what happens when you are unable to pay or feel like you don’t want to continue with the life insurance policy? Can you sell life insurance policy to a third party and how much can you expect as the settlement? Most importantly, when is the best time to sell the policy to a third party?

So the question is can you sell your Life Insurance Policy?

It is within your rights to sell a life insurance policy that you no longer need to a third party under the life settlement clause. Ideally, the sale involves transferring your claim over the expected payout to a third party investor in exchange for cash. In effect, the investor offers immediate cash payment (also known as a buyout) and continues paying the premiums up to the time of your passing when they can then claim the full settlement from the insurer. Life Settlement companies like Magna, help you sell your life insurance policy form the comfort of your own home, or over the phone.

Sell Life Insurance Policy How much cash can you expect from the sale?

How much you receive from the life insurance sale depends on a host of factors set out by the third party investor. In most cases, the investor considers such factors as the value of the policy, your current health condition, and age.

The average settlement ranges from 20 to 25 percent of the value of your policy. The subject is nonetheless open to negotiations, and this has seen the settlement value shoot to as high as 50 percent of the policy size. You should, however, note that not every subscribed life insurance qualifies for settlement.

Eligibility for life insurance policy sale

Almost every third-party life insurance investor has eligibility criteria that they use to screen individuals seeking to sell their life insurance. Nonetheless, some of the standard procedures followed by most investors include the fact that you must be above 70 years of age and have a policy value of more than $50 thousand. Most companies also prefer universal, whole, and convertible term life policies.

The regulations are, however, not set in stone. Plus, the stiff competition has forced some companies to accept policies for individuals aged 65 years. Most investors will also overlook the age limit, especially if the insured is terminally ill with a life expectancy of less than two years.

When does settling a life insurance policy make sense?

Non-payments of premiums

Insurance companies may decline to honor a life insurance claim if you stopped or have been inconsistent with paying premiums. Therefore, in the event financial constraints make it impossible to honor the regular premiums, remember that you have the option to sell the policy in a life settlement rather than allowing the insurance company keep the money.

Medical expenses and emergencies

When pressed by large medical expenses that need to be paid up front, you can always count on the proceeds of the settlement. Though saddening, health complications may in actual sense raise the settlement value of the policy where the investors project a lower life expectancy.

How to maximize the settlement amounts that get to your bank

Life policy settlement is taxable under income and capital gains. With the government taxing the settlement, the last thing you need is a broker or insurance agent seeking to dig further into the little left. Maximize the amount of the settlement that gets to your bank account by working with inexpensive agencies, and, if possible, reach out to the investor directly.

Contact Magna Life Settlements to get a free estimate on how much cash you can get from your life insurance policy!

How A Life Settlement Impacted My Family

Years before he joined the life settlement industry, Magna’s Senior Vice President Clay Gibson was impacted by his grandfather’s decision to sell his life insurance policy. In a personal essay, Clay shares how his grandfather’s life settlement made an impact on his family.

“My grandfather was in his late ‘70s in 2002 and even though he had some minor health issues he realized he was likely to live for quite a few more years. Decades earlier he had taken out two life insurance policies, each worth $1 million, one in his name alone and one in the name of he and my grandmother. If they held onto the policies, they were going to have to start paying increasingly expensive premiums again.”

Read the rest of Clay’s life settlement story on LinkedIn.

Bill HR 7203 to Allow Life Settlements to Fund Long-Term Care

Bill HR 7203

A new bill being weighed by the U.S. House of Representatives would make provision for the tax-free rollover of life settlement proceeds into tax-free accounts dedicated to long-term care. The bill, H.R. 7203, was sponsored by Rep. Kenny Marchand (R-TX) and referred to the House Ways and Means Committee on November 30.

H.R. 7203, known as the Long-Term Care Account Act, would provide a significant benefit for seniors who are facing the daunting costs of long-term care. If those individuals have a life insurance policy that is no longer serving them, the bill would permit them to easily use the money from a life settlement to fund an assisted care facility, in-home care or other treatments deemed medically necessary.

The provisions of the Long-Term Care Account Act include:

Tax-free transfer of funds

The tax-free transfer of funds from a life settlement into accounts used exclusively for long-term care expenses. That money can be used for long-term care insurance or any “qualified health expenses” that a medical practitioner would recommend to treat health impairments or maintain health for retirees.

– As long as the distributions from life settlements into the long-term care accounts are used for their stated purpose, they will be exempt from any tax. If funds are used for unauthorized purposes unrelated to long-term care, those expenditures will be subject to both income tax and a 20 percent excise tax.

– If the funds distributed to the accounts from life settlements are not spent on long-term care expenses, they can remain in the account untaxed until the death of the account holder and that person’s spouse.

H.R. 7203 is a win-win for seniors

The Long-Term Care Account Act is a win for seniors looking for new revenue sources, pairing the prime opportunity of a life settlement with the pronounced need of long-term care. Rising health care costs during retirement are one of the chief reasons people over 65 investigate life settlements, and the passage of this legislation would link the two in a way that will provide tangible benefits to Americans seeking to make the most of their retirement years.

Please don’t hesitate to urge your elected representatives to support this important bill. For more information about life settlements or the pending legislation’s, you can contact a Magna representative by scheduling a call today.


Conning Report Reviews Robust Life Settlement Year

Life Settlement Year - Magna Life Settlements

The face value of total life settlements has increased for the second consecutive year, signaling a promising landscape for the settlement market, according to the 2018 Conning Report released in November. The report, entitled, “Continued Growth, Positive Outlook,” includes an overview of the life settlement market, an examination of the factors that drive settlements and sections covering life settlement insurer performance and the trend toward higher cost of insurance (COI).

The report, which is the thirteenth annual review and forecast of the life settlement market produced by Conning, bodes well for the future of life settlements, despite dampening trends like COI increases. Among the report’s key findings:

Volume of the Life Settlement Industry

The volume of life settlements has increased in the past year, and the growth of the market has brought increased marketing and consumer efforts from life settlement providers.

Legal and Regulatory Developments

Legal and regulatory developments, including the 2018 Tax Cuts and Jobs Act (TCJA) and favorable legislative and court decisions for consumers, have made life settlements and more accessible and profitable option for many.

The drivers that point to future life settlement growth are largely favorable, including economic, capital, consumer and industry drivers.

Life Settlement Ten Year Forecast

The ten-year forecast predicting the future of the life settlement landscape spell continued growth. The ten-year forecasts for both annual gross market potential and annual volume for new settlements both increased from Conning’s 2016 predictions.

As insurers have increased cost of insurance (COI), consumers have seen a requisite rise in premiums, and as a result, life settlement investors might see a drop in investment returns.

For more in-depth analysis of the 106-page Conning report, keep an eye on Magna’s blog as our executives weigh in on the most compelling aspects of the research.

Trends in Today’s Aging Americans

Trends in Today's Aging Americans - Magna Life Settlements

Everyone who works with seniors knows that the American population is older than ever before, but what are the broader implications of this upward aging trend? How can people over 65 and their advocates optimize the retirement years? Dan Veto, a senior advisor for Age Wave, addressed these questions in depth at the Life Insurance Settlement Association (LISA) Life Settlement and Compliance Conference, held in Orlando in October.

Age Wave, considered one of the nation’s leading thought leaders on the aging U.S. population, engages in relevant research and consulting for a variety of industries that seek to enrich the lives of individuals over 65. Veto’s keynote was geared toward helping attendees understand how to best serve seniors in a rapidly changing demographic landscape. Early in his talk, Veto set the stage by pointing out that “two-thirds of the people in the history of the world who have attained the age of 65 are alive today.”

Research from Age Wave shows that 57 percent of seniors regard the retirement years as a new chapter in life, full of opportunity, versus “a winding down of life”(20 percent) or “a continuance of what life was” (23 percent).

More seniors surveyed about the factors that disrupted their work and retirement plans indicated that a personal health problem forced them to make different choices, and a gap exists between expectation and reality regarding the eventual need for long-term care. While just 37 percent of seniors believe they will need long-term care at some point, 70 percent actually do need it, and therefore many are ill-equipped for the financial demands.

The convergence of a multitude of factors, including rising health care costs, the age wave in America, and the growing gap between the average retirement age and average life span, has raised the profile of life settlements as a valuable option for seniors looking to meet unexpected needs and write the best possible last chapter for their lives.

“These social and economic trends create rising opportunities for life settlements as an option for some seniors who may benefit from an ‘equity release’ of a life insurance policy,” he said. “This may be an option for them to generate income to help fund their retirements.”

Help Your Clients Navigate Healthcare Finances

Help Your Clients Navigate Healthcare Finances

For seniors, health concerns often spring up unexpectedly, and the rising and prohibitive costs of quality health care lead to a burdensome financial situation for many people in their retirement years. An AARP study estimated that 65-year-old couples who retired in 2017 would face $275,000 of health care costs during retirement. When health expenses are a concern, seniors often turn to their financial advisors to help them navigate their limitations and choices.

Advisors must be adept at offering money solutions that are custom-built for a client’s particular needs, and the situation of a senior with health-care concerns is certainly different than a young married couple looking to start a college fund for their future children. So what are some principles that can guide advocates who are seeking the best financial path for their senior clients?

Make sure funds are accessible

A young investor with a long view toward higher education or retirement might be happy to invest in the stock market or another vehicle with a promising rate of return over a number of years, but seniors need resources that they can access easily when needs arise. A life settlement is one option that can provide quick funds for healthcare bills.

Understand the full picture

Does the retiree you are advising have long-term care insurance? Do he and his spouse hope to live in a retirement community or stay in their home as long as possible? Are they committed to maintaining investments to help their children and grandchildren? Financial goals and needs change over time, so an astute advisor will evaluate periodically to make sure a client’s portfolio fits his current situation.

Stay informed about new and innovative options

Even retirees who invest wisely during their working years can be hit with unexpected expenses, so advisors have a responsibility to stay informed on options that can increase their income in their later years. In addition to low-interest, easily accessed funds and the maximization of benefits from programs like Medicare and Social Security, advisors could offer a windfall to clients by providing information about life settlements. When a life insurance policy is no longer meeting a senior’s needs and the premiums are burdensome, a life settlement could be the optimal solution.

Advisors looking to give the full life settlement picture to their clients can review Magna’s settlement criteria here, or call a Magna specialist at 1-888-996-2475 to learn more.

How To Start the Conversation About Life Settlements With Your Client

 Life Settlements Client - Magna Life Settlements

For financial advisors, a trustworthy relationship with a client is everything, and no advisor wants to enter into a conversation unless he is sure he is offering something that will truly benefit the person on the other side of the table. Since life settlements (the sale of a life insurance policy for cash) are often a quite favorable option, advisors who are comfortable explaining them can help people who need a living benefit to add value to their golden years.

“Have Your Life Insurance Needs Changed?”

As an ideal entry point to this conversation, an advisor simply needs to ask a client, “Have your life insurance needs changed?” That inquiry can serve as a springboard to two important discussions: the potential reasons why a person might want to sell a life insurance policy and the benefits that could result from such a sale. First, some of the reasons why a life settlement might make sense include:

– Payment of the premiums has become prohibitive compared to the potential payoff of the policy.

– Their term policy is reaching its end and they don’t wish to renew and possibly pay higher premiums.

– They have gone through a divorce or experienced some other change in regard to their beneficiaries.

– New tax laws have altered the structure of their estate planning and the life insurance policy is no longer necessary.

When clients discover that their life insurance policy is no longer serving their needs, they are free to think about the return they could get on a life settlement. The retirement years are often characterized by rising and unexpected costs, and the money that can come from selling a life insurance policy can help pay for:

– The cost of long-term care, which is becoming increasingly expensive for seniors. According to the senior living placement service A Place For Mom, in-home care averages $4,250 a month and residential placement averages more than $6,000 a month.

– Turning assets into a legacy by setting up a fund for grandchildren’s college education or making a significant charitable gift to a cause or organization.

– Paying off debt to decrease stress during retirement years and possibly create opportunities for travel, hobbies or other new opportunities.

– Defraying the costs of expensive medical bills, prescription drugs or therapy that can allow for a longer and healthier life.

– Re-investing for an improved yield without paying annual premiums.

In many cases, a senior adult has been looking to his or her financial advisor for advice for decades, and the relationship provides a valuable opportunity for the presentation of the life settlement option. Because many life insurance policy holders have never been made aware of life settlement, they might be skeptical if they read about it but more interested if they learn about the possibility from a trusted financial advisor.

Every day, insurance policies lapse when the money could actually be working for a senior adult. For advisors tasked with presenting the best portfolio of opportunities to their clients, a thorough education about life settlements and their potential should be an essential part of that important relationship. If you need help evaluating your client’s policy for a life settlement, please reach out for a life insurance valuation and explore Magna’s life settlement calculator.

Read the original article by Magna’s Senior Vice President Clay Gibson on LinkedIn. 

3 Reasons Agents Should Inform Clients About Life Settlements

3 Reasons Agents Should Inform Clients About Life Settlements

What agents don’t know can hurt the financial future of life insurance policy owners. About half of all agents are uninformed about the benefits of life settlements, which is the sale of a life insurance policy for cash to an investor. Because of this disconnect seniors are missing valuable financial opportunities.

Take the case of a 71-year-old policy owner with a $1 million, 20-year term life insurance policy. His policy was about to expire, with a prohibitive rise in premiums from $5,000 to more than $220,000. He lapsed his policy because his agent didn’t inform him about life settlements, which could have converted his term policy to a permanent Universal Life product with a much lower annual premium of $28,000 and also paid him $200,000 for his policy.

According to the ICR Life Insurance Study, 79 percent of clients feel agents should inform them about life settlements. More than half a million U.S. seniors lapse their policies annually, and only 1,250 take advantage of a life settlement, meaning that only one in 400 people benefit from life settlements. The key to increasing that percentage is making sure seniors are well informed about their options. Life settlements are living benefits, or assets that help seniors while they are still alive. Yet despite their potential benefits, they are often overlooked by agents and, by extension, their clients.

There are three reasons agents should inform policy owners about life settlements:

Living Benefits Can Be an Effective Selling Tool

Insurance agents often hear the question, “What happens if I don’t need life insurance in the future?” Changes are inevitable over the years, sometimes altering a person’s reasons for purchasing life insurance in the first place. When clients buy life insurance, they should know that their investment has potential future resale. A living benefit today often outweighs the need to collect a death benefit tomorrow. A life settlement can put money back into the pockets of seniors who qualify.

Regulations Are Beginning to Require Disclosure

In an effort to protect seniors, more states are implementing consumer disclosure requirements when a senior wants to make a policy change. States are beginning to require insurance carriers inform policy owners that they should consult with a licensed insurance or financial advisor to learn about alternatives to lapsing a life insurance policy–options like selling the policy for a life settlement, gifting the policy to someone else as a charitable contribution, or converting it to a long-term care policy. These disclosure acts are in place in eight states and pending in two.

Living Benefits are a Win-Win-Win

Spreading the knowledge of life insurance options benefits agents, investors and, most importantly, policy owners. Agents may be eligible to receive compensation from life settlement providers. Investors benefit from purchasing the policy and collecting the face value when the policy matures. And policy owners win by getting rid of annual premiums and receiving the highest possible payout for their life insurance policy.

If you need help determining if a client qualifies for a life settlement, explore our life settlement calculator or simply reach out for a personalized life insurance valuation. Magna Life Settlements can help you determine if a client’s life insurance policy qualifies for a life settlement.

Read the original article by Magna Director of Origination Jim Purdy on LinkedIn.

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