As growing numbers of aging baby boomers turn to their advisors to help them achieve their retirement and estate planning objectives, many estate attorneys are faced with decisions regarding life insurance policies purchased that are no longer relevant. Life settlements have steadily gained greater recognition as a vital financial planning tool. Yet, some estate attorneys may be hesitant to recommend them until they gain deeper insight into the “inner workings” of what they view as a nascent industry with a still-maturing regulatory environment.

As growing numbers of aging baby boomers turn to their advisors to help them achieve their retirement and estate planning objectives, many estate attorneys are faced with decisions regarding life insurance policies purchased that are no longer relevant. Life settlements have steadily gained greater recognition as a vital financial planning tool. Yet, some estate attorneys may be hesitant to recommend them until they gain deeper insight into the “inner workings” of what they view as a nascent industry with a still-maturing regulatory environment.

Based on our experience, estate attorneys have three priorities relating to life settlements.

  1. Be confident of the market’s stability and know that it operates within a regulatory framework that protects consumers.
  2. Acquire a better understanding of specific planning scenarios in which the solution can benefit their clients. 
  3. Avoid disappointing their clients by setting realistic expectations about the outcome.

Secondary Market Stability and Regulatory Environment

For nearly 20 years, the secondary market for life insurance has been an option for policy sellers seeking to optimize the cash value of unwanted life insurance policies. The market recently has seen resurgence, as evidenced by a substantial increase in transaction volume during 2015.1 The market’s recent comeback is due to a number of factors, including a more stable regulatory environment that protects consumers and the infusion of investment capital from major financial institutions who are attracted to its non-correlated asset class. The increase in capital investment has given secondary market providers (those who acquire policies on behalf of portfolio investors) greater purchasing power for policy acquisitions. This is good news for senior consumers looking to sell policies for the highest possible value, often referred to as the policy’s “fair market value.”

In terms of the regulatory environment, 42 states now regulate life settlements.2 To further protect consumers, a handful of states have recently enacted life settlement disclosure laws3 requiring that policy owners be made aware of life settlements as a possible alternative to lapse or surrender. Federal and state government agencies have begun to recommend life settlements as a solution to pay for long-term care expenses or to offset public funds used for Medicaid nursing home care.

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Originally Published at Wealthmanagement.com
http://www.lifehealthpro.com/2016/07/19/life-settlement-solution-to-rising-senior-health?t=life-settlements

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