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

Life Settlements Buyer Beware - the” Unloading” of Failed STOLI Policies on an Individual Basis

Buyer Beware - the” 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

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/

Life Settlement Webinar - earn free CPE and CFP credits

Webinar: Life Settlements - Introduction and Best Practices

  

Date: October 12, 2010
Time: 11:30 am, Eastern Daylight (New York, GMT-04:00)

Join our next webinar to earn free continuing education credits
Earn 2 CFP or CPE credits

Register at http://www.freecpe.org/ or call us at 973-275-1110