Estate Planning Attorney Deemed It His Fiduciary Duty to Recommend Life Settlement for Client’s $500K Policy
December 17, 2018
Estate attorneys are often on the front lines when it comes to the problem-solving potential of life settlement transactions. The following case summary illustrates how the estate attorney for a 79 year old client with a $500,000 UL policy was instrumental in preserving the client’s cash assets which were being drained by premium payments costing more than $40,000 per year. Considering the high annual premiums and the fact that the policy had no cash surrender value, the attorney and his client agreed that a life settlement would be the best solution.
The insured had initially purchased the policy for estate planning purposes. But over the years the premiums had increased to 8% of the death benefit. With the policy maturing at age 95, the insured could no longer justify draining the cash assets from his estate for a policy with marginal benefit to his estate.
Although the client had initially discussed the idea of a life settlement with an insurance advisor, the advisor was not experienced with life settlements and he referred the matter to an estate attorney who had previously represented clients with life settlement transactions. The attorney chose Asset Life Settlements as his brokerage partner because he was aware of our reputation for successfully negotiating complex secondary market transactions.
High Premiums a Challenge
Most secondary market buyers prefer to purchase policies with lower annual premiums in the range of 3 to 5% of the death benefit. However, after submitting the case to eight different funders licensed in the state of Florida, we were able to attract offers from multiple buyers.
The bidding started with a low offer of $30,000. Given the seller’s fragile health condition and the carrier rating for the policy, we continued to negotiate the offers up to more than $100,000.
Once the eighth and final bid came in, we were able to offer the seller a net settlement of $125,000. The estate attorney recognized that receiving an offer equivalent to 25% of the death benefit was an excellent outcome and recommended the client close the deal.
This case illustrates the growing consensus among professional advisors such as estate attorneys, CPAs and financial advisors who recognize that life settlements are sometimes the most fiscally responsible course of action for unwanted life insurance policies. These advisors recognize their fiduciary duty to represent the client’s best interests and this case demonstrates the role life settlements can play in fulfilling that duty.If you have a potential case you would like to discuss, call us at 1-855-768-9085.