Life Settlement
The Next Alternative Asset Class
Problems
Consumers own life insurance which is either underperforming, highly leveraged or no longer needed for the original objective, such as collateral for a loan, buy/sell, key person or capital replacement. In the past, the only alternative included surrendering the policy with no economic value or continuing premium payments.
Solutions
Recently, a secondary market has emerged for the sale of life insurance policies to major institutions who build portfolios known as “bond substitutes". There is no correlation to equity and bond markets being solely based upon life expectancies. Life settlement has become a billion-dollar industry.
Consider a consumer who may need coverage under circumstances unrelated to the original problem, and their current policy is no longer viable. A solution might include exchanging the older policy for a policy design with no additional cash outlay.
Another example is a business sale. Corporate-owned insurance coverage might be sold. Rather than surrender a term life policy with no value, the policy may be sold for cash. Cash value insurance may be sold for higher values than the actual cash surrender value.
There are a number of planning opportunities associated with the settlement industry. It requires an independent advisor to achieve the best offers. Smith, Frank & Partners utilizes an auction process to achieve results. Because there are tax considerations with every settlement, counsel from a tax attorney and a CPA may be required.
Proceeds from a life settlement transaction may be taxable under federal or state law to the extent the proceeds exceed the cost basis. The proceeds from a life settlement transaction may be subject to claims of creditors. The receipt of proceeds from a life settlement transaction may adversely impact eligibility for government benefits and entitlements. The amount received for the sale of the Policy may be impacted by the circumstances of the particular purchaser of the Policy, the insuredŐs life expectancy, future premiums, the death benefit, the terms of the Policy, and the current market for insurance policies, among other factors. The amount received for the sale of the policy may be more or less than what others might receive for the sale of a similar policy. There may be high fees associated with the sale of a Life settlement.
Securities offered through Registered Representatives of NFP Securities, Inc., A Broker/Dealer and Member FINRA/SIPC
Investment Advisory Services offered solely through Investment Advisory Representatives of NFP Securities, Inc. a Federally Registered Investment Advisor
NFP Securities, Inc. is not affiliated with Smith, Frank & Partners, LLC.
NFP Securities, Inc. does not offer legal or tax advice.
Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.
This site is published for residents of the United States only. Registered representatives and investment advisor representatives of NFP Securities, Inc. may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed. Not all of the products and services referenced on this site are available in every state and through every representative or advisor listed. For additional information, please contact the NFP Securities, Inc. Compliance Department at 512-697-6000.
WEBSITE DEVELOPMENT BY NEUTRAL BLUE