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Life Settlements
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Mountain Financial has negotiated millions of dollars in life settlement proceeds
for senior policyholders. These seniors have used the funds to offset living expenses,
improve their quality of life after retirement, pay for health care expenses and
assisted living stays, purchase vacation homes, and fund alternative financial planning
products like annuities, long term care insurance and even replacement life insurance
coverage. In each case, a life settlement was much more financially beneficial than
lapsing, canceling or surrendering the policy.
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Below are a few examples in which a life settlement was the best option for the
policy owner.
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- Term Conversion:
Mr. Wilson's 20–year term policy was reaching its conversion deadline. He
was now 79 and was recently diagnosed with coronary artery disease. Mr. Wilson could
not afford to convert the policy and letting his $250,000 policy lapse would leave
him nothing.
Mr. Wilson applied to Mountain Financial and his policy was sold for $75,000. Mr.
Wilson was able to recover all of the premiums he had paid into the policy, plus
a handsome profit. He used the proceeds to pay off some debts, go on vacation, and
add more funds to his retirement portfolio.
- Unplanned Health Change:
Dave was 76 and had just suffered a heart attack, which left him permanently disabled.
His family was unprepared for this unfortunate turn of events. After learning of
the Medicaid requirements and the cost of a care facility, the family was unsure
how they were going to pay for his care.
Fortunately, the staff at the care facility offered the life settlement option to
Dave’s family when they found out about his $500,000 insurance policy. The family
soon sold that policy for a $250,000 settlement, and eliminated the premium payments.
These funds covered the three years Dave resided in the facility before his passing.
The remaining cash was distributed to Dave’s original beneficiaries.
- Additional Insurance Needed:
An elderly couple had a $2.2 million policy held in an insurance trust that covered
the wife. Due to savvy investing decisions, their estate had increased considerably
and now the death benefit on the policy was inadequate. The premiums on this policy
were also escalating and the policy was becoming outdated.
Their estate planner decided to sell the policy to help fund the purchase of a $4
million dollar joint survivorship policy. Mountain Financial was able to negotiate
a $440,000 purchase price. Since the husband was in perfect health, the premiums
on the survivorship policy were very affordable, even lower than the original policy.
- Key–Man:
A company owns a $4 million dollar policy on an executive who had retired 4 years
prior. The surrender value was $440,000 and since the company no longer wished to
make the $80,000 p/y premium payments, a surrender was being considered.
Their financial advisor immediately recommended a life settlement. The company was
offered $880,000 for the sale of the policy and netted $800,000 after taxes, almost
doubling the cash surrender value!
In this case, the surrender value in the policy was lower than the $480,000 cost
basis. Therefore, there was a capital gains tax of $80,000 on the $400,000 income
generated (the difference between the settlement amount and the cost basis).
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