Deconstructing the Life Settlement Application – Understanding the life settlement process (part 2)

Last time we left off we discussed the importance of knowing the identity of the insured .

The next pertinant question on the life settlement application is determining who the policy owner is.

The policy owner is the person or entity (ie trust, pension plan, business) that possesses all of the rights to the policy, including the right to sell the policy. 

For the sake of this discussion we are not concerned about the obligation of the policy owner to the beneficiarys and insured, such as the trustees obligation to the trust, but rather why having information about the policy owner is important.

The policy owners situs usually determine which states laws govern the transaction.  Thats why on the application the policy owners address is a critical piece of information.

Almost half of the policies that we review are trust owned life insurance .  In those cases the situs of the trust determines which state laws would apply.

When policies are company owned it is the location of the business that will determine the situs.

Often times when we are working in regulated states we are asked if the situs of the policy owner can moved from one staet to another.

To redomicile a policy to a unregulated state is not only unscrupulous but in certain states it is illegal and carries severe penalitiesl; including criminal prosecution

Please post any questions you have so we can better inform you.

Until next time keep educating yourself because in the words of Sy Sims an educated consumer is our best customer

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Integrity Life Solutions Gets Funding for Small-Face Policies

Integrity Life Solutions Gets Funding for Small-Face Policies
Posted October 25, 2010 4:39PM PST

Integrity Life Solutions, a life settlement broker based in Maplewood, N.J., said today it has reached an agreement with a new funding source that wants to buy small-face policies.

Alex Sirotkin, chief executive of the firm, told The Life Settlements Wire that his firm developed an exclusive relationship with the new domestic fund to enter the market. He said it isn’t a large fund, but it is a good sign and he’s hoping it will attract more capital to the market.

His brokerage will work with agents with policies to sell ranging between $50,000 and $500,000. Transactions in regulated states must go through licensed providers, but the fund can work directly with the broker in unregulated states.

“Small-face doesn’t give rise to great fees,” Sirotkin said. “Part of the strategy is [to bring in] lots of nickels as opposed to big dollars.”

His brokerage or the fund may pay for life expectancy reports to keep costs down since fees are less on small-face policies, Sirotkin said. Producers who convert term policies to permanent policies also get fees from carriers, he added.

Source:

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New press release – life settlements

View our most recent press release at http://www.24-7pressrelease.com/press-release-service/175860

Integrity Life Settlements is a viatical settlement and life settlement broker, located in the New York area in Maplewood NJ. They negotiate the transaction between the seller and the Buyer. Their expertise is in obtaining the highest possible value for your policy from only reputable financial institutions. Integrity Life Settlements is affiliated with other professionals including attorneys, accountants and actuaries who can provide you with independent financial advice. If you prefer, Integrity Life Settlements will work with any of your trusted financial and legal advisors. In either case, a due-diligence will be performed prior to any transaction.

http://www.freecpe.org/ or www.integritylifesettlements.net or call 973-275-1110

Posted in accounting continuing education, cpe webinar, free cpe, Life Settlement Broker, Life Settlements, Sell your life insurance policy, Senior Life Insurance, Uncategorized, Viatical Settlements | Leave a comment

Apollo Global Management is bidding on $6 billion worth of life insurance policies

NEW YORK (TheStreet) — Private equity firm Apollo Global Management is bidding on $6 billion worth of life insurance policies held by KBV Groep.

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Apollo is raising $525 million to acquire life policies and the Oregon Investment Council (OIC) may be one of those investors, according to a report from Bloomberg.

A representative from the OIC verified that the approval was given to commit $100 million to the fund pending review.

“This is good for the life insurance market. It shows there is still some value for larger portfolios to be assembled,” said Doug Head, executive director of the Life Insurance Settlement Association. “People want to do these kinds of deals and, there is enough liquidity for these deals in the tertiary market.”

According to documents on the Oregon Investment Council’s website, the policies were for sale at distressed prices because European regulators are encouraging banks to divest their non-core assets. Apollo expects the life insurance policies to rake in a 15 percent to 22 percent internal rate of return with a leveraged 5 times multiple of invested capital.

Head said he did not believe there would be any legal disputes or regulatory inquiries into the transaction if it were to proceed.

“This is a case of one institution, offsetting the interest of another institution,” he said. Head added that other private equity comapnies might also make similar investments.

Apollo spokesman, Charles Zehren, said the firm had no comment on the report.

–Written by Maria Woehr in New York.

To contact the writer of this article, click here: Maria Woehr.

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Viatical Settlements versus Life Settlements – what is the difference?

Examples of important Life Settlement topics covered by CPE Nasba approved seminar presented by Integrity Life Solutions, LLC – “Life Settlements: Introduction and Best Practices

Viaticum. Definition.  Eucharist given to a dying person; last rites.

As you will learn in a CPE course entitled “Life Settlements: Introduction and Best Practices” (presented by Integrity Life Solutions, LLC, Maplewood, NJ) the life settlement industry sprung from the AIDs crisis in the 1980s and 1990s. A Viatical Settlement is the purchase of a life insurance policy by an investor where the insured of the policy is terminally ill, generally defined as less than a two-year life expectancy. While the IRS does not define a Viatical Settlement, per se, the Code makes a distinction for tax purposes between life insurance settlements on insureds who have a life expectancy of less than two years, and life insurance settlements on insureds with LEs of greater than two years – the former transaction resulting in no taxable gain (as if they had died and the beneficiaries had received the proceeds of the death benefit on the policy.)

Also mentioned in the Free CPE course, is that ironically, many state legislatures have not made this technical distinction between Viatical Settlements and Life Settlements, the latter dealing with non-terminally ill insureds. Many state statutes regulating this area are generically called Viatical Settlement statute, even though they include the regulation of what are technically Life Settlements. Such statutes such as the recent one in New York, may have initially covered true Viatical Settlement cases, and then later were either amended or otherwise changed to include Life Settlement cases. It is important for the practitioner to understand the technical difference and to not be misled by possible misnomers contained even in state laws. (This again will be more fully explained in the Integrity Free CPE webinar or in person seminar.) Perhaps the IRS “got it right” in that the Code does not label the transaction type one or the other, but merely promulgated regulations based upon facts and circumstances.

Life Settlements, which in essence therefore sprung from Viatical Settlements, have also been tainted in some measure by the legacy of the early history of the Viatical industry, which left hundreds or more of investors, investing in excess of perhaps one billion dollars in viatical settlement policies, holding the bag. Mutual Benefits, a Viatical Settlement company based in Florida, was the largest of these failures, selling a projected profit stream on viaticated policies, that never came to fruition, in some measure because AIDs patients refused to die as they was projected. Thus, at once, the macabre and ghoulish nature of Viatical Settlements and later on Life Settlements, joined with the poor reputation earned by the Viatical industry on the investment side. The Life Settlements industry today is no doubt still living this tainted reputation down.

Integrity Life Solutions, LLC offers a free CPE course with No Strings Attached. Our free CPE course is written per NASBA guidelines which approves us to offer a 100 minute free CPE class. This course is designed to save you time and money while you learn and earn free credits.
This 2 credit free CPE and CFP class introduces an overview to the Life Settlement industry. This free CPE course will explain why it is your fiduciary duty as a CPA and CFP to understand and recognize a viable life settlement and to be able to explain it to your clients.

http://www.freecpe.org/   or  www.integritylifesettlements.net or call 973-275-1110

Integrity Life Settlements is a viatical settlement and life settlement broker, located in the New York area in Maplewood NJ. They negotiate the transaction between the seller and the Buyer. Their expertise is in obtaining the highest possible value for your policy from only reputable financial institutions. Integrity Life Settlements is affiliated with other professionals including attorneys, accountants and actuaries who can provide you with independent financial advice. If you prefer, Integrity Life Settlements will work with any of your trusted financial and legal advisors. In either case, a due-diligence will be performed prior to any transaction.

http://www.freecpe.org/ or www.integritylifesettlements.net or call 973-275-1110

Posted in accounting continuing education, cpe webinar, free cpe, Life Settlement Broker, Life Settlements, Sell your life insurance policy, Senior Life Insurance, Viatical Settlements | Leave a comment

Life Settlements – Buyer Beware

http://www.producersweb.com/r/pwebmc/m/erez+rotem

check out my article on producersweb.com

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Familiarize Yourself With The Option of a Life Settlement (Part 2)

Familiarize Yourself With The Option of a Life Settlement (Part 2)

This is Part 2 of a three part series presented by Integrity Life Solutions and Integrity Life Settlements
  Part 1 can be viewed at http://www.freecpe.org/life/senior-life-insurance-settlements

Why would an individual or trust want to sell a life insurance policy? For the same reasons that an individual would cash in or lapse a policy. They may no longer want or need the policy – their beneficiaries have pre-deceased them, their children are grown and independent, their estate has diminished and their potential estate tax has decreased or disappeared, or their company has been sold and a buy-sell agreement is no longer applicable. They may no longer be able to afford the premiums – their retirement assets have diminished and are no longer producing enough income to cover the premium payments, or they need the money they were using for  premiums to pay for other expenses like long term care or nursing home expenses.  Or, they simply may need cash. Often their goals have changed and rather than leaving money to their beneficiaries, they want more cash to supplement their own living expenses.  Sometimes older individuals live longer than they had planned for. But, in fact, they could need the cash for innumerable other reasons. Consider this example closely. An owner of a 20 year term policy may never have had the intention of converting it to a permanent policy, a feature that exists on most term policies, and is now letting it lapse. But your client may instead have the ability to sell the policy to an investment company which will then convert the policy for their own benefit after the sale. Your client could be walking away from thousands of dollars because of his ignorance, and of course the carrier will be “laughing all the way to the bank” now that its obligation to pay any death benefit has ceased. Alternatively, the client may still want to have insurance, and need insurance, but the current policy may not fill his needs. A new policy may offer more bells and whistles, such as a death benefit guarantee or a longer death benefit guarantee.  Internal costs of insurance have decreased in newer policies. So, the client is considering exchanging the current policy for a new one in the context of a 1035 exchange of the cash value. However, even after consideration of the tax advantages under section 1035, it may be more lucrative to sell his current policy (likely a taxable event) if the sale price is much greater than cash surrender value of the existing policy. Many life settlements, in fact, result in cash payments to sellers of amounts in excess of 4 or 5 times the cash surrender value.

What kind of policies sell?  All kinds of policies, including term policies, as long as they are convertible to a permanent policy.  Some policies, however, are more marketable than others.  The sale price is dependent upon at least these 5 variables: (1) the face of the policy (the amount of the death benefit), (2) the life expectancy (LE) of the insured, (3) the cash surrender value (if any), (4) the insurance company’s rating or credit worthiness and (5) the cost to keep the policy in force – projected premium payments. The death benefit, cash surrender value and the credit rating of the issuing insurance company are fairly simple and straight forward. The life expectancy of the insured is very much the crux of the issue. Obviously, the shorter the life expectancy, the greater the buying price as a percentage of the death benefit. This is because the shorter the life expectancy, the sooner the secondary buyer or new owner will collect the death benefit and less in premiums needed to carry the policy forward.  As to premiums, buyers require up-to-date illustrations from the carriers indicating how much they should expect to pay over the coming years, through expected maturity (or the LE year); Buyers will always want to pay the minimum premium to keep the policy in force – that is the cost of insurance only.

Potential buyers evaluate how much they might be willing to bid on a policy based upon their own projected internal rates of return (IRR) in light of these and other parameters.  Although somewhat anecdotal, my understanding is that offers will be made on the basis of IRRs from 12 percent to 20 per cent, and higher, after consideration of the fund’s total investment (initial purchase price, plus future premiums). And these figures may be net of other transactional costs not within the scope of this discussion.
 

Integrity Life Solutions, LLC offers a free CPE course with No Strings Attached. Our free CPE course is written per NASBA guidelines which approves us to offer a 100 minute free CPE class. This course is designed to save you time and money while you learn and earn free credits.
This 2 credit free CPE and CFP class introduces an overview to the Life Settlement industry. This free CPE course will explain why it is your fiduciary duty as a CPA and CFP to understand and recognize a viable life settlement and to be able to explain it to your clients.

http://www.freecpe.org/   or  www.integritylifesettlements.net or call 973-275-1110

Integrity Life Settlements is a viatical settlement and life settlement broker, located in the New York area in Maplewood NJ. They negotiate the transaction between the seller and the Buyer. Their expertise is in obtaining the highest possible value for your policy from only reputable financial institutions. Integrity Life Settlements is affiliated with other professionals including attorneys, accountants and actuaries who can provide you with independent financial advice. If you prefer, Integrity Life Settlements will work with any of your trusted financial and legal advisors. In either case, a due-diligence will be performed prior to any transaction.

http://www.freecpe.org/ or www.integritylifesettlements.net or call 973-275-1110

Posted in accounting continuing education, cpe webinar, free cpe, Life Settlement Broker, Life Settlements, Sell your life insurance policy, Senior Life Insurance, Uncategorized, Viatical Settlements | Leave a comment

Life Settlements – Buyer Beware

Buyer Bewarethe” Unloading” of Failed STOLI Policies on an Individual Basis

This anecdote is a true story – I will not disclose others’ names to protect the innocent and regrettably, most likely, the guilty as well. This brief article is not of journalistic quality, I admit – I have not dug into and verified the facts. Take it with a grain of salt, if you must – but read on and judge for yourself.

We are brokers in the life settlement industry – the purchase of seniors’ life insurance policies by investors who wait for someone’s death to collect their rewards. This is a shameful place to be – an industry tainted with the stench of malfeasance – bid-rigging; mismanagement; misrepresentations; fraud; bankruptcy; even ponzi artists using the life settlements name only to defraud unwitting investors of their hard-earned money – the perps not even knowing the first thing about life insurance or life settlements, actually. We are worse than ambulance chasers. We thrive when others are sick. We pray for low life expectancies; we rejoice when others are about to die; investors rejoice when they do die.

Or some would believe or have you believe. In actual fact, we are business people, performing a service, doing the best we know how, representing those to whom we owe a fiduciary duty and moral obligation. We are really no different from you.  We happen to have landed in an industry with a serious public relations problem. A funeral home is a business that might be said to thrive on death, but does not cause death, hasten death, and its shareholders certainly do not wish for death – death…. just is.

But when Joe walked through our door today, and we discussed his possible purchase of a $6mm life insurance policy that was offered to him by an agent in the life insurance business – a proverbial friend of a friend – I knew why we are sometimes viewed as basically dogs living in the gutter. Is that too harsh a description? Joe described the policy as being cheap – $140,000 annual premium per year. But he (the agent) said that the premiums might go up some – but he can’t know exactly how much. The current owner purchased the policy about two years ago from the original owner, six months after it was initially issued. The insured is 77 now, and has some serious health issues – and they would provide medical records, but there was no mention of a particular life expectancy, LE reports, or the like. The policy had never been shopped before – that is, offered out to the institutional market – this was a private sale – the owner is more interested in selling this privately because he thinks he can do a bit better this way, rather than paying institutional fees.

Joe gave us the name of the insured. We checked the case out with our local friendly provider who told us on the QT that the case was rejected by them. The meds were provided by a doctor who has been red-flagged as being, let us say, unreliable. It would also be impossible to obtain an LE report from at least one noteworthy LE company, because it also has refused to accept any meds from such doctor for the same reasons.

At the risk of being accused of profiling by geography or ethnicity, or both, the policy, agent and owner were all apparently from the same Borough, informally or purposefully blacklisted by some in our industry.  If you are able to read between these lines above, it is an indication at least of reputational smoke, to which I refer, if not the actual burning bush, so to speak.  I must say that while the reputation may be deserved from five miles up, unless one is a complete cynic (which I am not….today) then one must recognize that there are always exceptions to the rule and one should not cast aspersions on an entire class.

What was described, to me, however seems clear although admittedly only on a gut level – a STOLI policy purchased 2.5 years ago, on the basis of false medical records, with the intent of resale after the contestability tolled, which was not too long ago. Failing the sale of the policy into the secondary institutional market, said policy owner is seeking to unload this policy at retail.

It is no wonder why we get slapped around for being part of disreputable, corrupt and otherwise immoral enterprise. If you are approached about the purchase of any marketable in an asset class with which you are totally unfamiliar – such as Joe was in relation to life insurance – do what Joe did. Find someone who you trust and ask a lot of questions. Bottom line, with our advice to stay clear, we may have saved Joe about $1 million in premiums on a policy that, assuming it was not contested by the carrier on the basis of insurable interest or fraud, would not “mature” in any sensible investment timeframe.

Please visit us at www.freecpe.org to learn the basics of life settlements

The reader is encouraged to attend Integrity Life Solutions, LLC Free CPE seminars for further information about this and other topics in the life settlement arena. Contact Susan Lubin, CFP at 973.275.1110 or susan@iLifesolutionsllc.com

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Familiarize Yourself With The Option of a Life Settlement (Part 1)

Monday, September 20, 2010

Familiarize Yourself With The Option of a Life Settlement (Part 1)

As a part of your fiduciary responsibility, you should be familiar with the option of a life settlement for any client with a life insurance policy, be it an individual, a trust or a business. You should be aware that there exists a secondary market for life insurance policies, an institutional market which buys life insurance policies purely for financial gain.

Familiarize Yourself With The Option of a Life Settlement
By Alex Sirotkin, J.D.
What is a life settlement? A simple definition is “the sale of a life insurance policy on the life of a senior into a secondary market for more than the cash surrender value.”
As a part of your fiduciary responsibility, you should be familiar with the option of a life settlement for any client with a life insurance policy, be it an individual, a trust or a business. In fact, several states have statutes on the books that make it mandatory for an insurance company to notify an owner about this option if he is surrendering or lapsing a policy. You should be aware that there exists a secondary market for life insurance policies; an institutional market which buys  policies purely for financial gain – that is, the death benefit. There are enough of these institutional buyers such that a rather organized market has evolved over the past twenty years.
While policy values in today’s market are somewhat depressed due to global financial conditions, for any market to work, sellers must benefit also. Here is how it typically works. Life settlement brokers, who represent the seller, solicit bids from possible buyers (institutional funds) with the intent of creating an informal auction, in which buyers are bidding against one another, driving up the price. It is important to understand that a life settlement broker can tap into the entire market at one time. Naturally, there can be a huge difference in the selling price between simply contacting one life settlement buyer as compared to getting multiple bids through a broker. Beware, therefore, of the distinction between buyers and brokers. Bottom line, a life settlement broker works for your client to maximize the sale price of a policy by leveraging potential buyers against one another. The broker’s commission, being a percentage of the gross sales price, will increase as well, so the broker has an incentive to perform well for his client.

Integrity Life Solutions, LLC offers a free CPE course with No Strings Attached. Our free CPE course is written per NASBA guidelines which approves us to offer a 100 minute free CPE class. This course is designed to save you time and money while you learn and earn free credits.
This 2 credit free CPE and CFP class introduces an overview to the Life Settlement industry. This free CPE course will explain why it is your fiduciary duty as a CPA and CFP to understand and recognize a viable life settlement and to be able to explain it to your clients.

http://www.freecpe.org/

Integrity Life Settlements is a viatical settlement and life settlement broker, located in the New York area in Maplewood NJ. They negotiate the transaction between the seller and the Buyer. Their expertise is in obtaining the highest possible value for your policy from only reputable financial institutions. Integrity Life Settlements is affiliated with other professionals including attorneys, accountants and actuaries who can provide you with independent financial advice. If you prefer, Integrity Life Settlements will work with any of your trusted financial and legal advisors. In either case, a due-diligence will be performed prior to any transaction.

http://www.freecpe.org

Posted in accounting continuing education, cpe webinar, free cpe, Life Settlement Broker, Life Settlements, Sell your life insurance policy, Senior Life Insurance, Viatical Settlements | Leave a comment