Life Settlements

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Life Settlements

• Designs In Life
• 800-696-1104
• email jeff_at_designsinlife.com

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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

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Viatical Settlements Life Settlements

• Life expectancy less than two years
• Terminally ill
• Insured can be any age
• Private money investors
• No privacy or confidentiality

• Life Expectancy greater than two years but less
  than 12
• Insured can not be terminally ill
• Insured must be at least 70
• Institutional investors
• HIPAA rules must be kept
• Privacy confidentiality is a kept
• E O Insurance

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BASIC Qualification Guidelines

• Insured must be at least 70
• Policy face value at least 200,000
• Life expectancy less than 12 years
• Cash Surrender Value less than 40 of Face Value
• Premiums less than 6 of Face Value

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What types of policies?

• Universal Life
• Convertible Term
• Whole Life
• Variable Life

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Why?

• Insurance Policy no longer needed
• Estate tax change
• Family issues
• Premium too expensive
• Suitability
• Non-Recourse Premium Financing
• Buy/Sell Agreement
• Retirement and Key Person
• For Long Term Care or other health needs
• Replacement of an existing policy with a new
  policy

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Designs In Life Case 1

• Female age 79
• Universal Life
• Face Amount 7,000,000
• Cash Value17,000
• 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. Saving 131,000
  per year.

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Designs In Life Case 2

• Female age 78
• Universal Life
• Face Amount 12,000,000
• Cash Value 177,000
• Offer 2,000,000
• Reason for Sale The insured decided to
  replace her existing non-guaranteed policy with a
  new guaranteed 12,000,000 policy. She sold her
  policy and invested the settlement amount in a
  new policy. Her premiums were reduced from
  500,000 to 410,000, and she saved one year of
  premium.
• Agent Compensation 750,000 on settlement
  and sale of the new policy.

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Designs In Life Case 3

• Male age 70
• 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

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Designs In Life Case 4

• Male age 82
• Universal Life
• Face Amount 1,000,000
• Cash Value 112,000
• Offer 257,000
• Reason for Sale The premium for the
  insureds 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

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Designs In Life Case 5

• Male age 75
• 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

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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
140,000
Taxed as Long Term Capital Gains
Taxed as Ordinary Income
10,000
Cash Surrender Value (basis earnings)
Taxed Basis (Premiums Paid)
50,000
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We Shop For The Best Offer
Institutional Funder ABC Corporation Financial
Advisor John Doe Name of Insured Harry
Smith Face Amount 2,000,000 Policy
Type Universal Life Cash Value 55,000 Life
Settlement Offer 725,000
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What to look for

• A 1035 exchange of life insurance
• Convertible Term policies
• Key Person insurance policies
• Replacement opportunities
• Any policy the insured may be planning to lapse
  or surrender

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Why Designs In Life?

• 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 we are known for.